2007 (11) TMI 76 - AT - Service Tax

Grinding Dead Burnt Magnesite lumps into powder for its customers - ignorance of the scope of the new levy Business Auxiliary Service under which grinding of DBM was classified by the dept. - furnished the information and paid the service tax when liability was finalized Penalty unjustified

Summary

Issues: Service tax liability, penalties under Sections 76, 77, and 78 of the Finance Act, 1994, ignorance of new levy 'Business Auxiliary Service', non-payment due to ignorance, benefit of Section 80.

In this case, the Appellate Tribunal CESTAT, Chennai dealt with a matter where service tax of Rs.4,74,416/- was demanded from a company for Business Auxiliary Services rendered. The original authority imposed penalties under Sections 76, 77, and 78 of the Finance Act, 1994. The Commissioner (Appeals) modified the penalties, reducing some and upholding others. The company requested the Tribunal to decide the appeal on merits. The assessee was engaged in grinding Dead Burnt Magnesite lumps into powder for customers but had not followed statutory formalities or paid the service tax due until later. The Commissioner (Appeals) vacated one penalty and reduced another, considering the company's actions in promptly paying arrears after receiving clarification on their tax liability. The Tribunal found that the non-payment was due to ignorance of the new levy 'Business Auxiliary Service' and that there was no suppression of facts. As the company promptly furnished information and paid the tax when certain about their liability, the Tribunal set aside one penalty under Section 76 of the Finance Act, while upholding the impugned order otherwise. The Tribunal concluded that the company deserved the benefit of Section 80, which allows the proper officer not to impose a penalty in such circumstances. The stay application was also disposed of accordingly.