2016 (8) TMI 187 - AT - Service Tax

Levy of penalty u/s 78 - non-payment of service tax on TDS portion initially - suppression of facts or not - Held that - Law at the infancy stage may certainly cause difficulties and hardship to the assessee as well as the tax gatherers since various interpretations and technicalities are involved. The facts and circumstances of the case does not demonstrate any defiant attitude of the appellant towards law. No mens rea appears to be present to appreciate that Revenue was deliberately made to suffer. In these circumstances, there appears a preventable reason to exonerate the appellant from penal consequences of law under section 78 of the Finance Act, 1994, by invoking section 80 of the Act. - Penalty waived - Decided in favor of assessee.

Summary

Issues:
1. Entitlement to relief under Section 80 of the Finance Act, 1994 for penalty imposed under section 78 due to confusion regarding tax deducted at source (TDS) inclusion in taxable services.

Analysis:
The appeal before the Appellate Tribunal CESTAT CHENNAI involved the question of whether the appellant is eligible for relief under Section 80 of the Finance Act, 1994, concerning a penalty imposed under section 78 of the same Act. The appellant had not included the tax deducted at source (TDS) in the gross value of taxable services provided, leading to confusion in computing the tax liability under the Finance Act, 1994. The appellant argued that the complexity of tax laws made it challenging for a layperson to comprehend, resulting in the inadvertent exclusion of TDS from the taxable amount. Upon realizing the error, the appellant rectified the situation by paying the service tax, including the TDS amount. The appellant contended that there was no intention to evade tax, malafide, or deliberate attempt to prejudice the Revenue, warranting relief under Section 80 of the Act.

The Revenue, however, opposed the appellant's stance, asserting that the omission of TDS from the taxable amount constituted a suppression of facts, depriving the Revenue of its rightful dues. The Revenue highlighted the difference in views regarding the inclusion of TDS in the gross value of taxable services provided. After hearing both parties and examining the records, the Tribunal acknowledged that the infancy stage of the law could pose challenges and hardships for both taxpayers and tax authorities due to various interpretations and technicalities involved. The Tribunal found no defiant behavior on the part of the appellant towards the law, concluding that there was no mens rea or deliberate intent to harm the Revenue. Consequently, the Tribunal decided to relieve the appellant from the penal consequences under section 78 of the Finance Act, 1994, by invoking section 80 of the Act, thereby waiving the penalty. However, the Tribunal ruled that interest would be payable for the default period. The appeal was allowed to the extent indicated in the judgment, with the decision announced in open court.