2016 (11) TMI 788 - AT - Service Tax

Discharge of tax liability - GTA service performed by a society of Chhattisgarh State statutory body performing statutory functions - Held that - The circular No. 89/7/2006-ST dated 18.12.2006 has observed that the activities performed by Sovereign/ Public Authorities under the provisions of law are in the nature of Statutory Obligations and are being undertaken as mandatory and statutory functions. They are not in the nature of services to any particular individual for any consideration and as such they do not constitute taxable service and no service tax would be leviable on the same. Admittedly the authority is a Government State Body assisting the farmers in procuring their produce under minimum retail price and assisting the farmers for sale of their produce. The clarification issued by Board to the above fact is a sufficient reason for the appellant who were performing their statutory duties to entertain the bonafide belief that they were not liable to Service Tax. Otherwise also I find that in the absence of any evidence to reflect upon any positive suppression or mis-statement with an intent to evade payment of duty longer period of limitation would not be available to the Revenue. Penalty set aside - Service Tax as also the interest stand confirmed against the assessee as not being challenged - appeal disposed off - decided partly in favor of appellant.

Summary

Issues:
Challenge to penalty imposed under sections 78 and 77 of the Finance Act, 1994.

Analysis:
The appellant, a Government Society, engaged transporters to procure paddy from farmers for distribution under the public distribution system. The Revenue initiated inquiries, demanding service tax for the GTA service received by the appellant. The original adjudicating authority confirmed the demand, interest, and penalties under sections 78, 76, and 77 of the Finance Act. The Commissioner (Appeals) upheld the order, except setting aside the penalty under section 76.

The appellant, through their advocate, conceded to the service tax liability and interest but contested the penalties. They argued that being a society of Chhattisgarh State and following circulars exempting statutory bodies from service tax, they acted in good faith. The advocate highlighted the appellant's statutory functions and the belief that no service tax liability existed due to the nature of their activities.

The Revenue contended that the appellant's failure to discharge the service tax liability warranted penalties, as determined by the lower authorities. They urged the rejection of the appeal.

Considering the submissions, the Tribunal noted Circular No. 89/7/2006-ST, stating that activities by Sovereign/Public Authorities as statutory obligations are not taxable services. The appellant, a Government State Body assisting farmers, acted in good faith based on this clarification. The Tribunal cited a precedent where penalties were set aside for a statutory Government body due to a genuine belief of non-liability.

The Tribunal found no evidence of intentional evasion of duty, thus denying the Revenue a longer period of limitation. Citing the precedent and the lack of malafide intent, the Tribunal set aside the penalties. The appeal was disposed of with confirmation of the service tax and interest, which were not challenged.

In conclusion, the Tribunal ruled in favor of the appellant, setting aside the penalties based on their statutory duties and genuine belief of non-liability for service tax. The decision emphasized the importance of good faith and statutory functions in determining tax liabilities for Government bodies.