2017 (12) TMI 962 - AT - Service Tax

Penalty u/s 78 - Business Auxiliary Services - service tax with interest paid before issuance of SCN - Held that - appellant in this case paid the service tax along with interest before the issue of SCN - also there was a confusion regarding the taxability of the amount received by the appellant from the banks and the non-banking financial companies - penalty dropped - appeal allowed - decided in favor of appellant.

Summary

Issues:
Penalty under Section 78 of the Finance Act for service tax liability based on commission received by the appellant from banks and non-banking financial companies.

Analysis:
The appellant, an authorized dealer for cars, was engaged in servicing vehicles, selling spares, and promoting products by Maruti Udyog Ltd. The Department alleged that the appellant was liable for service tax under Business Auxiliary Service for marketing auto loan products and receiving commissions. A show-cause notice was issued, and after due process, the demand was confirmed with a penalty under Section 78. The appellant appealed against this order, arguing confusion regarding the taxability of amounts received and citing precedents where similar transactions were not liable for service tax.

During the appeal hearing, the appellant did not appear but requested a decision on merit. The learned AR reiterated the findings of the impugned order. The appellant contended that confusion regarding tax liability was clarified by Circular No.87/05/06 and certain CESTAT Bench decisions. The appellant claimed a bona fide belief that they were not liable to pay service tax and should benefit under Section 80 to drop the penalty. The appellant relied on specific decisions to support their argument.

After reviewing the grounds of appeal and decisions cited by the appellant, the Tribunal held that the penalty under Section 78 was not sustainable. The appellant had paid the service tax along with interest before the show-cause notice, and there was confusion about the taxability of amounts received from financial institutions. Various Tribunal Benches had also acknowledged this confusion. The Tribunal found no evidence of suppression of facts to evade duty and concluded that the appellant had a bona fide belief in not being liable for service tax. Following the precedents cited, the Tribunal dropped the penalty under Section 78, allowing the appeal of the appellant.

In the operative portion of the Order pronounced on 17/11/2017, the Tribunal ruled in favor of the appellant, dropping the penalty under Section 78 based on the circumstances and the appellant's genuine belief regarding the service tax liability.