2017 (12) TMI 1499 - AT - Service Tax

Penalties u/s 73, 77 and 78 of the FA, 1994 as also u/s 70(a) of the Act read with Rule 7 and Rule 7C of the STR, 1994 - late registration with the Service Tax Department for not paying the Service Tax of ₹ 34,262/- on Reverse Charge Basis and the late filing the ST-3 returns - Held that - the Tribunal in number of decisions, has held that when the law is not clear, the assessee cannot be held guilty of any suppression etc in the absence of any evidence to the contrary - There could be a doubt entertained by the assessee. When the assessee is reflecting all their business activities in their balance sheet, no malafide can be attributed to them - penalty set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
Penalties imposed under Sections 73, 77, and 78 of the Finance Act, 1994, and under Section 70(a) of the Act read with Rule 7 and Rule 7C of the Service Tax Rules, 1994.

Analysis:
The appellant challenged penalties for late registration with the Service Tax Department and late filing of ST-3 returns, amounting to ?34,262 on Reverse Charge Basis. The audit discovered the service receipt records in the ordinary course of business. The appellant argued that they maintained accurate records and rectified the short levy promptly after the audit's notice. They believed the services provided were educational and not taxable, hence the lack of registration. The lower authorities dismissed this defense, stating clarity in the law required correct duty payment. However, the Tribunal noted that in cases of unclear laws, the absence of evidence of malafide intent absolves the assessee. The appellant's belief was deemed reasonable, supported by their balance sheet disclosures. Citing a similar case, the Tribunal ruled in favor of the appellant, setting aside the penalties imposed under various sections.

In conclusion, the Tribunal found no valid grounds for penalties against the appellant, overturning the decision and allowing the appeal.