2009 (8) TMI 88 - AT - Service Tax

Penalty for non payment / delayed payment of service tax section 78 waiver of penalty - when the Revenue directed them to pay the tax they paid the entire amount of service tax of Rs. 2, 50, 220/- for the entire period from July 2001 to March 2006 held that - there was a doubt in the field as regards above activities which were clarified by the Board only on 06.11.2006. As such I am of the view that benefit of Section 80 is required to be extended to the appellants penalty set aside.

Summary

In the appellate tribunal case of CESTAT AHMEDABAD, the judgement was made by Mrs. Archana Wadhwa, Member (Judicial). The appellant, represented by Shri P.G. Mehta, was a service station registered with the Service Tax Department. They provided services to two-wheelers and paid service tax when charges were levied on customers. However, they did not pay service tax on services provided for free under manufacturer warranty coupons, assuming no charges meant no tax liability. When directed by Revenue, they paid Rs. 2,50,220 in service tax for July 2001 to March 2006. The challenge was against penalties imposed under Section 78 and Rs. 100/day under Section 76 of the Finance Act, 1994. The appellant argued that the tax liability for free services was unclear until clarified by Board Circular No. 87/05/2006-ST on 06.11.2006. They cited a Tribunal decision where penalties were waived under Section 80 of the Finance Act, 1994, for similar circumstances. After considering the SDR's arguments, it was acknowledged that there was indeed a doubt in the field regarding the taxability of these activities until the Board's clarification in 2006. Consequently, the penalties were set aside while confirming the service tax payment, and the appeal was allowed. The judgement was pronounced in court accordingly.