2016 (9) TMI 240 - AT - Service Tax

Imposition of penalties - Valuation mandap-keeper services catering services suppression of assessable value and short payment of service tax payment of short paid tax with interest on demand bonafide belief section 80 of the Finance Act, 1994 Held that - the definition of mandap-keeper was amended in 2007 to include social functions which included marriage and religious functions, the appellant could have entertained a bona fide belief that marriage is a religious function, and thus erred in payment of tax. Also, the tax liability was not contested by the appellant, and was duly paid with interest when demanded no malafide intention to evade tax section 80 applies penalty not imposed demand of tax with interest upheld appeal disposed off decided partly in favor of appellant.

Summary

Issues: Undervaluation of amounts received for catering services and mandap-keeper services leading to service tax liability and penalties

In the judgment by the Appellate Tribunal CESTAT MUMBAI, the issue at hand was the undervaluation of amounts received for catering services and mandap-keeper services during a specific period. The appellant had suppressed the assessable value, leading to a service tax liability. The appellant accepted the tax liability and paid the same with interest, seeking leniency in the non-imposition of penalties. The main contention was that the appellant believed in good faith that service tax liability did not apply to amounts received for marriage functions, considering them as religious functions.

The Tribunal noted that the appellant did not contest the tax liability on its merits and had already paid the tax along with interest. Therefore, the tax liability for the period was upheld. However, regarding penalties, the Tribunal considered the circumstances of the case. It observed that the appellant may have genuinely believed that service tax did not apply to amounts received for marriage functions due to the historical classification of marriage as a religious function. The definition of 'mandap-keeper' was amended in 2007 to include social functions like marriages and religious functions. In the absence of contrary evidence, the Tribunal found that the appellant's belief was reasonable and could have led to the non-payment of service tax. Consequently, the Tribunal invoked Section 80 of the Finance Act 1994 to set aside the penalties while upholding the service tax liability and interest.

In conclusion, the Tribunal disposed of the appeal by setting aside the penalties imposed, upholding the service tax liability and interest, and invoking the provisions of Section 80 of the Finance Act 1994 in favor of the appellant.