2008 (12) TMI 173 - AT - Service Tax

Penalty - penalties imposed on the appellants under various Sections of the Finance Act, 1994 - in the absence of evidence that the appellants had not registered and failed to pay service tax on account of fraud, collusion, willful mis-statement or suppression of fact, the demand invoking larger period itself was not sustainable pre deposit waived.

Summary

Issues:
1. Application for waiver of predeposit and stay of recovery of penalties under various Sections of the Finance Act, 1994.
2. Liability towards service tax, education cess, applicable interest, and penalties.
3. Disputed tax on incentives received and ignorance of statutory provisions.
4. Sustainability of penalties imposed due to willful suppression of facts.

Analysis:

Issue 1: Application for waiver of predeposit and stay of recovery of penalties
The appellants filed an application seeking waiver of predeposit and stay of recovery of penalties imposed under various sections of the Finance Act, 1994. The appellants had rendered Business Auxiliary Service (BAS) without following statutory formalities, leading to penalties. The Commissioner (A) found the liability towards service tax to be Rs. 1,20,144/- and imposed penalties under different sections of the Act.

Issue 2: Liability towards service tax, education cess, applicable interest, and penalties
The appellants paid the service tax intimated by the department before the show cause notice was issued. They also paid a disputed amount of tax on the same services before adjudication. The Commissioner (A) reduced the penalties imposed by the original authority, considering the appellants' ignorance of statutory provisions. The appellants made a prima facie case against the penalties adjudged in the impugned order, leading to a waiver of predeposit and stay of recovery of penalties.

Issue 3: Disputed tax on incentives received and ignorance of statutory provisions
The appellants claimed that they were unaware of their liability to pay tax under the Act when they rendered BAS. They argued that their failure to discharge the service tax was due to ignorance of the statutory provisions. The liability to tax on incentives received remained disputed, as the appellants were not aware of such tax obligations when BAS was introduced in July 2003. They relied on previous Tribunal decisions where penalties were vacated due to ignorance of new levies.

Issue 4: Sustainability of penalties imposed due to willful suppression of facts
The original authority found that the appellants willfully suppressed the fact of rendering services and evaded tax, justifying the imposed penalties. However, the appellants argued that their transgressions were a result of ignorance of statutory provisions, citing a Supreme Court judgment to support their case. The Tribunal, considering the facts and case law cited, granted a waiver of predeposit and stay of recovery of penalties, as the appellants made a prima facie case against the penalties imposed in the impugned order.

This detailed analysis of the judgment highlights the issues involved, the arguments presented by the parties, and the Tribunal's decision regarding the waiver of predeposit and stay of recovery of penalties in the case.