2017 (1) TMI 925 - AT - Service Tax

Imposition of penalty - Business Auxiliary Services - during the period July 2003 to September 2004 - the appellant had already taken the registration for payment of service tax with effect from 17.11.2004. The registration was taken before the investigation commenced by DGCEI. A part of service tax due was paid before commencing the investigation. However, rest of the dues were paid after commencing investigation along with interest due thereon under section 75 of the Finance Act, 1994 - Held that - the appellant had reasonable cause for delay for compliance under Finance Act, 1994. Accordingly, I am of the view that this is a bona fide case for waiver of penalties under section 80 of the Act. However, since the demand for service tax and interest is not disputed, I uphold the same - penalty set aside - appeal allowed - decided in favor of assessee.

Summary

Issues:
1. Dispute regarding service tax liability during July 2003 to September 2004.
2. Imposition of penalties under sections 76 and 78 of the Finance Act, 1994.
3. Applicability of penalty waiver under section 80 of the Act.

Analysis:
1. The appellant, a proprietorship firm acting as a direct sales agent for ICICI Car Finance, was engaged in Business Auxiliary Services, falling under section 105 (zzzb) of the Finance Act, 1994. The Directorate General of Central Excise Intelligence (DGCEI) initiated an investigation against the appellant, leading to a Show Cause Notice in 2007 demanding payment of service tax amounting to ?3,32,294, along with interest and penalties. The Original Authority confirmed the demand, but the Commissioner (Appeals) later set aside the penalty under section 76, while upholding it under section 78.

2. The appellant, represented by a Chartered Accountant, argued that they had registered for service tax payment before the investigation by DGCEI began in 2004. They contended that a portion of the service tax was paid before the investigation, with the remaining amount settled post-investigation along with due interest under section 75 of the Act. The appellant claimed that since the service tax and interest were paid, there was no basis for imposing penalties under section 78.

3. The dispute centered on the imposition of penalties under section 78, not the service tax itself. The appellant voluntarily registered for service tax upon realizing their activities fell under Business Auxiliary Services, even before the investigation. The appellant, unaware initially of their service tax obligations, registered under an amnesty scheme in 2004 and subsequently cleared the entire tax liability with interest. The Tribunal acknowledged the appellant's proactive steps towards compliance and deemed the case a bona fide one for penalty waiver under section 80 of the Act. Consequently, while upholding the service tax and interest demands, the Tribunal waived the penalties due to the appellant's reasonable cause for delay in compliance.

In conclusion, the Appellate Tribunal CESTAT NEW DELHI upheld the service tax liability and interest payment by the appellant but waived the penalties under section 78 due to the appellant's proactive compliance efforts and reasonable cause for the delay.