2009 (1) TMI 215 - AT - Service Tax

Rent-a-cab service - rend-a-cab service became liable to service tax w.e.f. 1-4-2000. However the appellants did not pay service tax up to February 2002 since there was no provision in the contract between ONGC and the appellants for payment of service tax and there was correspondence between the appellants and ONGC regarding service tax and finally the matter was referred to the arbitrator who ruled in their favour and also ordered that the appellants should discharge the service tax liability and ONGC should reimburse the same. Thereafter appellants paid the service tax even before the issue of show cause notice by the Department Adjudicating authority confirmed the demand and imposed penalty - Held that since the penalty imposed are minimum no further relief can be given

Summary

Issues:
1. Liability for service tax on rend-a-cab service provided to ONGC.
2. Non-payment of service tax by the appellants up to February 2002.
3. Dispute resolution through arbitration and subsequent payment of service tax.
4. Adjudication and imposition of penalties under different sections of the Finance Act, 1994.
5. Appeal against duty demand confirmation and stay petition.

Analysis:
1. The appellants provided jeeps/cabs to ONGC on a contract basis, rendering their 'rend-a-cab service' subject to service tax from April 1, 2000. The absence of a provision in the contract for service tax payment led to non-payment by the appellants until February 2002. Following arbitration, where the appellants were ruled in favor and directed to discharge the service tax liability, they paid the tax even before a show cause notice was issued by the Department.

2. The appellants argued that they informed the Department early in 2001 about their inability to pay due to ONGC's non-payment of service tax. They emphasized their cooperative society's lack of profit motive and financial constraints. The absence of a tax collection provision in the original agreement was highlighted, with payment made promptly post-arbitration. They contended that there was no intention to evade tax, citing relevant case law to support their position.

3. The Department contended that the appellants knowingly failed to discharge their liability despite being aware of the consequences. They argued that even if ONGC did not pay, the appellants were obligated to settle the tax liability.

4. The Tribunal found the dispute centered on the penalties imposed on the appellants, with no disagreement on the tax liability. The Commissioner (Appeals) upheld the penalty, noting the appellants' awareness of their obligation to pay regardless of ONGC's reimbursement. The Tribunal concurred, emphasizing that the appellants failed to demonstrate financial hardship or reasonable cause for penalty waiver under Section 80 of the Finance Act, 1994.

5. While acknowledging the non-speaking order by the Original Adjudicating Authority, the Tribunal rejected the appeal, citing the minimum penalties imposed by law and the appellants' failure to provide sufficient grounds for penalty waiver. The judgment underscored the appellants' awareness of their tax liability and the absence of valid grounds to contest the penalties imposed.

This detailed analysis of the judgment from the Appellate Tribunal CESTAT, Ahmedabad highlights the issues surrounding service tax liability, non-payment, dispute resolution, penalty imposition, and the subsequent appeal outcome.