2016 (5) TMI 845 - AT - Service Tax

Waiver of penalty imposed under Section 78 of the Finance Act, 1994 and late fee - Section 80 ibid - Erection, commission and installation services providing exclusively to state Government company - Delay in filing of ST-3 returns under Section 70 of the Finance Act, 1994 read with Rule 7C of Service Tax Rules - Held that - the appellant have entertained bonafide belief in non payment of service tax for the reason that the show cause notice demanded the service tax for an amount of ₹ 2.80 crore for the period April, 2008 to March, 2013 whereas in the impugned order the demand was reduced to ₹ 26.36 lacs which is for the period July, 2012 to March, 2013, this shows that there was serious confusion among the assessee as well as department about the levy of service tax on the services provided to State Government Electricity distribution companies. However when the issue was made clear the entire service tax demand confirmed has been paid before adjudication alongwith interest. I found that appellant have shown reasonable cause for non payment of service tax on due date. Accordingly they have made out a case for waiver of penalty in terms of Section 80 of the Finance Act,1994. Therefore the penalty imposed under section 78 invoking Section 80 of the Finance Act is waived of. As regard the late fee, it is found that admittedly the service tax was confirmed only for the period July, 2012 to March, 2013 therefore no late fee can be charged for delay of filing/non filing of ST3 returns for the period prior to 1/7/2012. However, the service tax liability confirmed and admittedly paid by the appellant for the period July, 2012 to March, 2013, the appellant was duty bound to file ST3 returns for this period on due date therefore the appellant is liable for late fee for non filing/delayed filing of ST3 returns for the period July, 2012 to March, 2013 in terms of Section 70 read with Rule 7C of Service Tax Rules, 1994. - Decided partly in favour of appellant

Summary

Issues:
1. Service tax demand confirmation and appropriation.
2. Recovery of interest and penalty imposition.
3. Recovery of late fee for delayed filing of ST-3 returns.
4. Bonafide belief in non-payment of service tax.
5. Waiver of penalty under Section 78.
6. Imposition of late fee for non-filing of ST-3 returns.

Service Tax Demand Confirmation and Appropriation:
The appeal was against an Order-in-Original confirming a service tax demand of ?26,36,363 for the period from 1/7/2012 to 31/3/2013. The Commissioner confirmed the demand, appropriated the amount already paid, imposed interest, and penalty under relevant sections of the Finance Act, 1994. The appellant, engaged in providing services to a state electricity distribution company, was found to have paid less service tax than required, leading to the demand. The demand for the period prior to 1/7/2012 was dropped due to a government exemption notification. The appellant appealed for waiver of penalty and late fee.

Bonafide Belief in Non-Payment of Service Tax:
The appellant argued a bonafide belief in not paying service tax, citing confusion within the department regarding taxability of services provided to state government electricity distribution companies. The appellant believed services were exempted, given a government notification and the introduction of a negative list of services in the Union Budget of 2012. The appellant paid most of the demanded amount before the show cause notice and the rest after, along with interest. The appellant claimed they had reasonable cause for non-payment and requested a waiver of penalty under Section 80 of the Finance Act, 1994.

Waiver of Penalty under Section 78:
The Tribunal found merit in the appellant's argument, acknowledging the confusion surrounding the levy of service tax on the services provided. Considering the bonafide belief held by the appellant and the payment made before adjudication, the Tribunal waived the penalty imposed under Section 78 invoking Section 80 of the Finance Act.

Recovery of Late Fee for Delayed Filing of ST-3 Returns:
Regarding the late fee for delayed filing of ST-3 returns, the Tribunal noted that no late fee could be charged for the period before 1/7/2012. However, as the service tax liability confirmed and paid by the appellant was for the period from July 2012 to March 2013, the appellant was liable for late fee for non-filing or delayed filing of ST-3 returns for that specific period under Section 70 read with Rule 7C of the Service Tax Rules, 1994.

In conclusion, the Tribunal partly allowed the appeal, waiving the penalty under Section 78 based on the bonafide belief of the appellant and imposing late fee only for the period from July 2012 to March 2013 for non-filing or delayed filing of ST-3 returns.