2008 (4) TMI 294 - AT - Service Tax

Travel Agent non inclusion of high value tickets for purposes of service tax - bona fide belief that he had to pay Service Tax only from 2004 onwards - period involved in dispute is 2002-03 and 2003-04 - As the entire amount of service tax has been paid partly before the SCN and partly before the adjudication order, imposition of heavy penalties is not warranted - in terms of section 75 of the Finance Act, interest on delayed payment is mandatory so appellant should pay the interest

Summary

Issues:
1. Service Tax liability for a Travel Agent.
2. Imposition of penalties under sections 76 and 78 of the Finance Act.
3. Validity of penalties and interest for delayed payment of Service Tax.

Analysis:

Issue 1: Service Tax liability for a Travel Agent
The appellant, a Travel Agent, was found to have suppressed the value of taxable services. Despite the appellant's argument of not considering high-value tickets due to stiff competition, the department alleged evasion. The appellant paid the entire tax amount before the show-cause notice, claiming no intention to evade. The Commissioner upheld penalties citing the payment post-detection of evasion. The Tribunal noted the total tax liability of Rs. 5,97,850, with the appellant paying Rs. 2,00,000 before the notice and the remainder before adjudication. The appellant's plea for leniency due to confusion over liability for previous periods was considered.

Issue 2: Imposition of penalties under sections 76 and 78 of the Finance Act
The Adjudicating Authority confirmed the Service Tax demand and imposed penalties under sections 76 and 78, with the Commissioner upholding it. The appellant argued against the penalties, stating the tax calculation was incorrect, and the evasion allegation lacked proof. The Department contended that evasion was evident. The Tribunal found the penalties to be harsh and set them aside, emphasizing the mandatory interest under section 75 of the Finance Act.

Issue 3: Validity of penalties and interest for delayed payment of Service Tax
The appellant challenged the heavy penalties imposed despite paying the tax before adjudication. The Tribunal acknowledged the mandatory nature of interest under section 75 for delayed payment of Service Tax. Consequently, all penalties were revoked, but the appellant was directed to pay the interest as per the statutory provision.

In conclusion, the Tribunal set aside the penalties imposed under sections 76 and 78 of the Finance Act but upheld the payment of interest in accordance with section 75. The judgment highlighted the importance of timely payment of Service Tax and clarified the liability of a Travel Agent in declaring taxable services, emphasizing the need for compliance with tax regulations to avoid penalties and interest for delayed payments.