2009 (6) TMI 56 - AT - Service Tax

Waiver of penalty u/s 80 imposed u/s 76 and 78 - The appellants are pleading vehemently, that there was no suppression of facts or any intent to evade payment of service tax. The appellants had been paying service tax on finance commission received from banks but were not doing so on finance payments from MUL. IN a letter date d25.10.2004 the appellants had informed the department that the agreement for financing the cars/motor vehicles was between MUL & different banks and service tax was paid directly by the MUL. This is also clear form the clarification note of MUL which is on record waiver of penalty upheld

Summary

Issues:
- Appeal against setting aside penalties under Section 76 & 78 of Finance Act by the Commissioner (Appeals).

Analysis:
The appeal before the Appellate Tribunal CESTAT, New Delhi was filed by the Revenue challenging the order of the Commissioner (Appeals) where penalties under Section 76 & 78 of the Finance Act were set aside. The case involved the respondents receiving commission for arranging loans from banks. The Chartered Accountant representing the respondents argued that there was uncertainty regarding the levy of tax on services related to Motor Vehicles and Business Auxiliary Services for arranging finance. The respondents had deposited the tax for the relevant period after a show cause notice was issued. The original authority confirmed the tax demand and imposed penalties under Section 76 & 78 of the Act. However, the Commissioner (Appeals) overturned the penalties citing the absence of intent to evade tax and the respondents' cooperation in paying service tax on finance commission from banks but not on finance payments from another entity.

The Commissioner (Appeals) based their decision on the argument presented by the appellants that there was no suppression of facts or intent to evade tax. The appellants had informed the department about the arrangement between the entity and different banks regarding service tax payments. The Commissioner noted that the entity was in the process of calculating the tax when the liability was pointed out during an audit. Additionally, a letter from the other entity clarified the tax liability on fees/commission received for business activities. The Commissioner found merit in the appellants' contentions and set aside the penalties under Section 76 & 78 of the Act.

The Tribunal referred to a similar case involving the classification of activities related to arranging loans and receiving commission. In the case of Wings Group of Companies vs. Commr. of S.T., Bangalore, it was established that such activities fall under 'Business Support Services' from a specific date. This reference supported the doubt surrounding the levy of tax on the activity in question. Consequently, the Tribunal upheld the Commissioner (Appeals)' decision to set aside the penalties under Section 76 & 78 of the Act, citing the applicability of Section 80. The Tribunal dismissed the appeal filed by the Revenue, concluding that there was no justification to interfere with the Commissioner (Appeals)' order.

In conclusion, the Appellate Tribunal CESTAT, New Delhi upheld the decision of the Commissioner (Appeals) to set aside the penalties under Section 76 & 78 of the Finance Act, emphasizing the lack of intent to evade tax and the uncertainty regarding the tax liability on the specific activities carried out by the respondents.