2009 (3) TMI 22 - AT - Service Tax

Appellant a proprietor concern acted as a sourcing agent - misunderstanding as to whether the proprietary firm can be considered as a commercial concern for the purpose of business auxiliary service held that there was sufficient cause for the appellant in entertaining doubt that they were not liable to pay service tax especially in the light of Circular No.62/11/2003-ST and therefore by invoking provisions of Section 80 of the Finance Act penalties imposed on the appellant are set aside

Summary

Issues:
1. Whether the appellant is liable to pay service tax under the category of Business Auxiliary Service.
2. Whether penalties imposed under Sections 76, 77 & 78 are justified.
3. Whether the appellant, a proprietary firm, can be considered as a commercial concern for the purpose of business auxiliary service.

Analysis:
1. The appellant, a proprietor concern acting as a sourcing agent, received commission for services rendered to M/s ICICI Home Finance Ltd. The original authority and Commissioner (Appeals) confirmed the demand of Rs.76,945/- for the period 1/7/03 to 29/2/04, holding the appellant liable for Business Auxiliary Service. The appellant did not contest the demand but sought waiver of penalties.

2. The Company Secretary representing the appellant acknowledged the Tribunal's decision in a similar case and did not contest the service tax demand. However, he argued for the waiver of penalties citing lack of familiarity with the law and prevailing misunderstanding regarding the classification of a proprietary firm as a commercial concern for business auxiliary service. He relied on a Board's Circular to support the argument that an individual cannot be treated as a commercial concern.

3. After hearing both sides, the Tribunal confirmed the service tax demand but considered the appellant's doubt regarding their liability to pay service tax due to the prevailing confusion and the Board's Circular. The Tribunal invoked the provisions of Section 80 of the Finance Act to set aside the penalties imposed on the appellant, noting that there was a sufficient cause for the appellant to entertain such doubt. The appeal was disposed of with the penalties being waived.

This judgment highlights the importance of considering the circumstances and the appellant's understanding in tax liability cases, especially when there is confusion or lack of clarity in the legal provisions. The Tribunal's decision to waive the penalties in this case demonstrates a fair and just approach in dealing with inadvertent non-compliance by taxpayers, taking into account the specific facts and circumstances of each case.