2016 (11) TMI 585 - AT - Service Tax

Levy of penalty - bonafide belief - nonpayment of service tax on due date - Held that - As per the section 73(3), if the service tax either ascertained by the assessee or by the departmental officer and the same is paid alongwith interest, no show cause notice is required to be issued. I find that from the fact and the action of the appellant the case is clearly covers under Section 73(3). I have gone through judgments relied upon by both sides. Since the fact for imposition of penalty under Section 78 or to deal the case under provisions of Section 73(3) facts of individual case has to be ascertained therefore fact of each judgments varies from the fact of the present case, hence in my view as per facts of the present case these judgments are not applicable. As per my above discussion, I find that appellant s case is covered by provision of Section 73(3) and also under Section 80 of the Finance Act, accordingly penalty is set aside, service tax along with interest admittedly paid by the appellant is maintained. Appeal is allowed in the above terms

Summary

Issues:
1. Whether the repairing of moulds constitutes a service activity under Management, Maintenance, and Repair Services, leading to a demand for service tax and penalty.
2. Whether the appellant's belief that their services were exempted under Notification No. 8/2005-ST justifies non-payment of service tax and penalty.
3. Whether there was suppression of facts by the appellant justifying the imposition of penalty.
4. Whether the appellant's case falls under Section 73(3) and Section 80 of the Finance Act, warranting waiver of penalty.

Analysis:
1. The case involved the appellant undertaking repair work of moulds supplied by their sister concern and returning them to the client. The adjudicating authority confirmed the demand for service tax, interest, and penalty. The appellant contended that the repair work fell under Business Auxiliary Services, exempted under Notification No. 8/2005-ST. The appellant paid the service tax and interest upon realizing the taxable nature of their services, seeking settlement under Section 73(3) of the Finance Act.

2. The appellant argued that their bonafide belief in the exemption under Notification No. 8/2005-ST justified non-payment of service tax and penalty. They cited relevant judgments to support their stance. The Revenue, however, highlighted the issuance of a show cause notice invoking an extended period due to alleged suppression of facts by the appellant, leading to penalties under Section 73(1) subsection (4).

3. The Revenue contended that the appellant's failure to declare their repair activity to the department, coupled with the absence of filing returns or informing the department, constituted suppression of facts. They relied on judgments to support their argument against granting immunity under Section 80 of the Finance Act.

4. After considering both parties' submissions and perusing the records, the judge found merit in the appellant's argument regarding the repair activity falling under Business Auxiliary Services and being exempt under Notification No. 8/2005-ST. The judge noted the appellant's issuance of invoices and declaration of transactions in their books, establishing a reasonable cause for non-payment of service tax. The judge concluded that the appellant's case fell under Section 73(3) and Section 80 of the Finance Act, warranting the waiver of penalty. The judgments cited by both parties were deemed inapplicable to the present case's unique facts. Consequently, the penalty was set aside, and the payment of service tax along with interest was upheld, resulting in the appeal being allowed in favor of the appellant.