2009 (9) TMI 45 - AT - Service Tax

Services received from BSNL and Data On Line and distributed to various customers Held that - the respondent was redistributors of online services and that the original suppliers have paid service tax and that the respondents have not collected any service tax form their customers came to the conclusion that there was no mala fide intention on the part of respondents therefore extended benefit of Section 80 of the Finance Act. The appeal has been filed mainly on the ground that even after mistake was pointed out to them the respondents did not pay service tax payable and the interest on it and that the bona fide of the respondents are in doubt. This ground is not sufficient to interfere with the well-reasoned order of the Commissioner (Appeals) holding that the benefit of Section 80 is warranted in the said case

Summary

Issues:
Department's appeal against setting aside of penalty by the Commissioner (Appeals).

Analysis:
The case involves an appeal by the Department against the order of the Commissioner (Appeals) related to setting aside the penalty imposed by the original authority. The respondents, internet service providers, received services from BSNL and Data On Line and distributed them to customers. The Department contended that the service provided is subject to service tax. The original authority confirmed the service tax demand, interest, and imposed various penalties. On appeal, the Commissioner upheld the service tax demand and interest but set aside the penalties. The Department appealed against the penalty waiver.

The Commissioner (Appeals) invoked Section 80 of the Finance Act, 1994, which states that no penalty shall be imposed if the assessee proves a reasonable cause for the failure. The appellants argued that they did not deliberately evade service tax, believing that redistribution of services would not attract tax if initially paid by suppliers. The Commissioner found no mala fide intention, as the appellants did not benefit from non-payment, and the tax was to be collected from customers. It was concluded that the failure was due to confusion and a bona fide belief, warranting the benefit of Section 80.

The Tribunal noted that the respondents were redistributors of services, the original suppliers paid service tax, and the respondents did not collect tax from customers. It was emphasized that there was no mala fide intention on the part of the respondents, justifying the application of Section 80. The Department's argument that the respondents did not pay the tax even after being informed was dismissed, as the Commissioner's order granting the benefit of Section 80 was deemed well-reasoned. Consequently, the Department's appeal was rejected, affirming the waiver of penalties by the Commissioner (Appeals).

In conclusion, the Tribunal upheld the decision of the Commissioner (Appeals) to set aside the penalties imposed on the respondents under Sections 76, 77, and 78 of the Finance Act, 1994, based on the reasonable cause established by the appellants under Section 80. The case highlighted the importance of proving a lack of mala fide intention and demonstrating confusion or a bona fide belief to avail the benefit of penalty waiver under the relevant legal provisions.