2016 (11) TMI 18 - AT - Service Tax

Demand of service tax - imposition of interest and penalties - advertising services - Held that - As regard the tax liability of the services, we find that services provided by the appellant are indeed taxable and the same is liable for service tax. As regard the penalties under Section 76, 77 and 78, we find that the appellant though not discharged service tax in due time but they have been paying service tax in installment and almost entire demand was paid before issuance of show cause notice. The appellant given reason for non payment of service tax in time that they were in severe financial crisis. It is also fact that appellant had accounted for entire service tax payable as an outstanding in their books of accounts which shows that they had bonafide intention to discharge the service tax. Even if the service tax was collected but shown as a outstanding in the balance sheet, it can be construed that appellant had no malafide intention - appellant showed the reasonable cause for non payment of service tax on due time. Interest on the said service tax also paid by the appellant separately as per the direction of this Tribunal - appellant entitled for waiver of penalty under Section 76,77 and 78 in terms of Section 80 of the Finance Act, 1994, therefore penalties set aside - demand of tax with interest maintained - appeal disposed off - decided partly in favor of appellant.

Summary

Issues involved:
Service tax liability in event management, brand promotion, and advertising services; imposition of penalties under Sections 76, 77, and 78; applicability of Section 80 of the Finance Act, 1994 for waiver of penalties.

Analysis:

Service Tax Liability:
The appellant, engaged in event management and advertising services, failed to discharge their service tax liability promptly. The Chief Executive Officer admitted the non-payment was due to financial difficulties caused by the IT industry crisis. The appellant voluntarily deposited the service tax amount of ?54,63,548 in installments. The Adjudication order confirmed a demand of ?59,91,371, out of which ?54,63,548 was already paid. The appellant contested the penalties imposed, citing financial crisis as the reason for delayed payments.

Penalties Imposed:
The appellant's counsel argued that penalties under Sections 76, 77, and 78 were unwarranted, invoking Section 80 of the Finance Act, 1994. The appellant had paid most of the service tax before the show cause notice, demonstrating a genuine intention to fulfill their tax obligations. The financial crisis in the IT industry was highlighted as the reason for the delay. The appellant requested a waiver of the penalties based on these grounds.

Revenue's Position:
The Revenue contended that the appellant's claim for reimbursement should not exclude service tax liability as the claimed elements were integral to the output services. The Revenue opposed the waiver of penalties, stating that the appellant had collected but not remitted the service tax, disqualifying them from immunity. The Revenue cited various judgments to support its position on the tax liability and penalties.

Tribunal's Decision:
After considering both parties' arguments and reviewing the records, the Tribunal found the services provided by the appellant to be taxable. However, considering the appellant's financial crisis, the installment payments, and the genuine intention to pay, the Tribunal waived the penalties under Sections 76, 77, and 78 under Section 80 of the Finance Act, 1994. The confirmed service tax demand and the amount paid by the appellant, along with interest, were upheld. The appeal was partly allowed with the penalties set aside.

This detailed analysis covers the issues of service tax liability, penalties imposed, and the Tribunal's decision to waive the penalties based on the appellant's financial difficulties and genuine intention to fulfill their tax obligations.