2007 (6) TMI 215 - AT - Service Tax

Announcement of Scheme for registration of service providers and payment of tax in arrears, without penalty, during pendency of recovery proceedings even if as per the Scheme, appellant took registration and deposited tax arrears, penalty was imposed by department - scheme made no distinction between parties who sought registration on their own and the parties who took registration in the light of pending proceedings, therefore, appellant can t denied the benefit of exemption from penalties

Summary

Issues:
1. Applicability of a special scheme for registration and payment of tax arrears without penalty.
2. Imposition of penalty on the appellant for delay in registration and tax payment despite availing the special scheme.

Analysis:
1. The appellant provided services related to marketing, sale, and promotion of pre-paid cellular connections, recharge of SIM cards, and customer care services without registration or payment of service tax. Central Excise Authorities issued a notice to the appellant, and subsequently, the Central Government introduced a special scheme for registration and payment of tax arrears without penalty. The appellant availed the scheme by taking registration and depositing the tax arrears. However, penalty was imposed on the appellant for the delay in registration and tax payment. The lower authorities rejected the appellant's contention that they were covered by the special scheme and hence penalty should not apply.

2. The Commissioner (Appeals) observed that the appellant did not approach the department voluntarily under the special scheme and only took registration when caught by the department. The Commissioner noted that the appellant did not accept the levy of service tax voluntarily, indicating an intent to evade payment. The appellant's failure to file returns and the casual approach towards tax compliance were also highlighted. The Commissioner upheld the penalty imposed by the Adjudicating Authority, stating that the appellant was not entitled to the benefits of the special scheme due to their actions and non-compliance.

3. The appellant contended that the lower authorities erred in imposing the penalty as the special scheme did not differentiate between parties who voluntarily sought registration and those who did so during pending proceedings. The appellant argued that the scheme allowed service providers to avail of its benefits regardless of ongoing proceedings. Upon reviewing the scheme, the Tribunal agreed with the appellant, stating that the lower authorities were mistaken in denying the appellant the exemption from penalties. The Tribunal set aside the impugned order, allowing the appeals with consequential relief to the appellant.

In conclusion, the Tribunal held that the appellant was entitled to the benefits of the special scheme for registration and payment of tax arrears without penalty, irrespective of the timing of their registration in relation to pending proceedings. The penalty imposed on the appellant was deemed unsustainable, and the appeals were allowed in favor of the appellant.