2009 (1) TMI 134 - AT - Service Tax

Penalties appellants were under the bona fide belief that training in relation to SAP was not taxable. They thought that there was an exemption for vocational training services . However, the department investigated the issue. The party paid the entire amount of Service Tax along with interest in order to avoid litigation, though there was confusion with regard to their liability - issue is squarely covered by Section 73 (3) - no any intention to evade Service Tax - no justification for imposing penalties u/s 76, 77 and 78

Summary

The Judgement: Appellate Tribunal CESTAT Bangalore 2009 (1) TMI 134 - CESTAT (Final Order Nos. 1437-1438/2008 dt. 2.1.2009 in Appeal Nos. ST/299 & 275/2008)

1. Issue: Service Tax Liability
- M/s. C. Ahead Info Technologies Pvt. Ltd. believed that training in relation to SAP was not taxable, but the department found otherwise.
- The company paid the Service Tax along with interest to avoid litigation.
- Penalties under Sections 76, 77, and 78 were imposed.
- The Commissioner set aside the penalty under Section 76 but confirmed the Service Tax, interest, and penalties under Sections 77 and 78.

2. Analysis:
- The company argued that there was confusion regarding their liability and that the Service Tax demand should be set aside.
- They cited the case of Nokia (I) Pvt. Ltd. Vs. CC (2006) where it was held that 'consulting engineer service' includes training of personnel.
- The company paid the entire amount demanded to avoid litigation, which they believed was not due based on the above decision.
- They also pointed out that the Service Tax along with interest was paid before the issue of the show cause notice, making the notice invalid.
- Circular No. 137/167/2006/CX-4 was referenced, indicating that penalty proceedings should be closed upon compliance with Section 73(3).
- The company argued that penalties should be waived under Section 80 of the Finance Act, 1994, as they acted with a bona fide belief and paid the tax before the notice.
- The Tribunal found that the company did not intend to evade the tax, set aside all penalties, and allowed the company's appeal.

3. Conclusion:
- The Tribunal dismissed the revenue's appeal for the imposition of penalties under Section 76 as the company's appeal was allowed.
- Interest was deemed leviable, and penalties under Sections 76, 77, and 78 were set aside due to the company's lack of intent to evade tax and their belief that they were not liable for the tax. The appeal was allowed, and the revenue's appeal was dismissed. The judgement was pronounced on 2.1.2009.