2018 (3) TMI 701 - AT - Service Tax

Penalty - GTA Service - interpretation of N/N. 34/2004-ST dated 02.12.2004 - the appellant was misguided by wrong interpretation of the notification. The appellant was paying service tax when the freight amount exceeded ₹ 1500/-. Further, all the details of all the transactions wherein the freight was less than ₹ 1500/- were also recorded in the books of accounts. The appellant cannot be held guilty for suppression of facts and the penalties imposed is unjustified - the appeal is partly allowed by setting aside the penalties imposed without disturbing the demand of service tax.

Summary

Issues:
Demand of service tax under GTA services; Interpretation of Notification No.34/2004-ST regarding exemption on freight amount; Imposition of penalties for non-payment of service tax.

Analysis:
The appellant challenged the demand of service tax under GTA services after the department noticed non-payment of service tax on freight amounts ranging from ?751 to ?1500 to the GTA for goods transportation. A show cause notice was issued proposing recovery of service tax, interest, and penalties. The original authority and the Commissioner (Appeals) upheld the demand and penalties. The appellant argued that they believed in the exemption under Notification No.34/2004-ST for freight amounts below ?1500 based on interpretations from the Central Excise Law Manual and trading circles. They contended that there was no intention to evade tax, as all transactions were recorded, and they paid the tax promptly after the error was pointed out.

The appellant's counsel emphasized that penalties should be set aside since the appellant acted in good faith, following the interpretation they believed to be correct. The appellant had recorded all transactions, and there was no suppression of facts. The department's interpretation misled the appellant, leading to non-payment of service tax on freight amounts below ?1500. The Tribunal found the penalties unjustified, as the appellant had maintained proper records and rectified the error promptly after being informed. Therefore, the penalties were set aside, but the demand for service tax was upheld.

In conclusion, the Tribunal partially allowed the appeal by overturning the imposed penalties while maintaining the demand for service tax on the freight amounts. The appellant's good faith belief in the exemption under Notification No.34/2004-ST and the prompt rectification of the error were considered in deciding to set aside the penalties. The judgment highlights the importance of proper interpretation of tax laws and the significance of maintaining accurate records to avoid unintended non-compliance.