2009 (4) TMI 123 - AT - Service Tax

Tour Operator Services Service Tax was collected but not deposited - The appellants claimed to avail exemption in terms of Notification No. 6/2005-ST dated 1-3-2005 after surrendering of their registration as their annual turnover was below Rs. 3, 00, 000 held that - The contention of the appellants that they were not covered under the definition of tour operator services and taking the benefit of exemption limits are not sustainable when the appellants are charging service tax from their customers and at the same time not depositing the same with the department - The contention of the appellants that the reversionary authority has no power to impose penalty as original authority has opted not to impose any penalty is not convincing as there is a clear violation of payment of service tax on their part

Summary

Issues:
1. Revision of order by the Commissioner of Central Excise
2. Imposition of penalty under section 76 and section 77 of the Finance Act, 1994
3. Applicability of penalty in case of failure to pay service tax
4. Knowledge and deliberate evasion of service tax liability
5. Challenge to tax liability on 'tour operator services'

Issue 1: Revision of order by the Commissioner of Central Excise

The appeal raised concerns regarding the power of review exercised by the Commissioner of Central Excise, Pune, contending that it was contrary to the provisions of section 84 of the Finance Act, 1994. Section 84 empowers the Commissioner to call for the record of a proceeding and make necessary inquiries to pass an order. The appellant argued that there was no specific direction under section 84 for the Deputy Commissioner of Central Excise to review the file and take action.

Issue 2: Imposition of penalty under section 76 and section 77 of the Finance Act, 1994

The appellant submitted that they had paid the entire service tax amount along with interest, and no penalty should be imposed as the adjudicating authority had not imposed any penalty. They relied on legal provisions under section 76, which outlines penalties for failure to pay service tax, and cited relevant tribunal decisions to support their argument that once the original authority decided against imposing a penalty, it should not be revised by the Commissioner.

Issue 3: Applicability of penalty in case of failure to pay service tax

The appellant referred to the Supreme Court judgment in Hindustan Steel Ltd v. State of Orissa, emphasizing that the imposition of a penalty should be a matter of discretion exercised judiciously considering all relevant circumstances. They argued that they believed in good faith that they were not liable for service tax during the disputed period, citing tribunal decisions supporting their stance that doubt about applicability of service tax can be a reasonable cause for non-imposition of penalty under section 80.

Issue 4: Knowledge and deliberate evasion of service tax liability

The Judicial Member noted that the appellant had full knowledge of their liability to pay service tax, as evidenced by billing practices and the separate mention of service tax in invoices. The appellant's awareness of their customer availing Cenvat credit for service tax paid indicated deliberate evasion of tax liability. The Judicial Member found that the appellant's actions of collecting service tax from customers but not depositing it with the department constituted clear tax evasion.

Issue 5: Challenge to tax liability on 'tour operator services'

The appellant argued that they were not covered under the definition of 'tour operator service,' questioning the imposition of penalty. However, the Judicial Member dismissed this argument, stating that the appellant's charging of service tax from customers and subsequent depositing of the same after departmental investigations indicated evasion of tax liability, regardless of their interpretation of the service category.

In conclusion, the appeal was dismissed, and the order-in-revision imposing penalties was upheld based on the findings of deliberate tax evasion and the appellant's knowledge of their tax liability despite their arguments against penalty imposition.