2017 (4) TMI 801 - AT - Service Tax

Abatement under Tour Operators service - N/N. 1/2006-S.T., dated 1-3-2006 - denial on the ground that condition of the notification regarding non-availment of Cenvat credit has not been fulfilled by the appellant - Penalty - Held that - in absence of non-fulfilment of the said conditions provided in the notification, the benefit of abatement contained therein should not be available to the appellant. The amount of service tax along with interest was paid by the appellant before adjudication of the matter and availment of Cenvat credit at the material time was due to bona fide belief that the benefit of abatement, the provisions of Section 80 ibid can be invoked for non-imposition of penalty u/s 76 ibid. Appeal allowed - decided partly in favor of appellant.

Summary

Issues:
Appeal against denial of abatement under Notification No. 1/2006-S.T.
Imposition of penalty under Section 76 of the Finance Act, 1994.

Analysis:
The appellant, engaged in providing taxable services as a "Tour Operator," claimed abatement of 40% under Notification No. 1/2006-S.T. The Department denied the abatement, citing non-fulfillment of the condition regarding non-availment of Cenvat credit. The appellant rectified the mistake by reversing the Cenvat credit and informed the Department. Despite this, the Department confirmed a demand for service tax, interest, and imposed a penalty under Section 76 of the Finance Act, 1994. The Commissioner (Appeals) upheld this decision.

Upon review, it was found that the appellant had indeed availed and utilized Cenvat credit attributable to input services when opting for abatement under Notification No. 1/2006-S.T. Since the conditions of the notification were not met, the benefit was deemed unavailable to the appellant. However, considering that the service tax amount along with interest was paid before adjudication and the Cenvat credit availed was due to a genuine belief that abatement could still be claimed, the Tribunal invoked the provisions of Section 80 to waive the penalty under Section 76.

As a result, the appeal was partially allowed, setting aside the penalty imposed in the impugned order. The Tribunal disposed of the appeal accordingly, emphasizing the payment made before adjudication and the appellant's bona fide belief in claiming the abatement benefit despite the Cenvat credit issue.