2018 (4) TMI 1107 - AT - Service Tax

Penalty - Tour Operator s service - tax paid on being pointed out - Held that - there could be a bonafide belief on the part of the appellant not to pay the tax - In the absence of negative findings to reflect upon the malafide, the penalty imposed in respect of the second client is not sustainable - appeal allowed.

Summary

Issues: Taxability under Tour Operator's service category, Penalty under Section 78 of the Finance Act, 1994

Taxability under Tour Operator's service category:
The judgment addresses the issue of taxability under the Tour Operator's service category. The appellant contested being taxed under this category, arguing that they were only transporting employees using the client's vehicle and should not be considered taxable. The appellant had already paid the tax but disputed the penalty imposed under Section 78 of the Finance Act, 1994. The tribunal noted that a part of the demand was collected from a client but not deposited with the Revenue, leading to the penalty imposition.

Penalty under Section 78 of the Finance Act, 1994:
Regarding the penalty under Section 78, the appellant's advocate conceded that the tax amount was collected from clients but not deposited with the Revenue due to a bonafide belief that no tax was payable. The tribunal rejected this argument, emphasizing that the amount collected should have been deposited regardless of the belief in tax liability. The tribunal upheld the penalty for the amount not deposited.

Interpretation of legal entry and bonafide belief:
The appellant explained that no tax was paid for services to another client based on the agreement, which did not classify the services as Tour Operator's service. However, upon the Revenue's notification, the appellant paid the tax during the appeal. The tribunal considered the bonafide belief of the appellant and set aside the penalty for the second client, as there was no evidence of malafide intent. The judgment highlighted the importance of negative findings to support the imposition of penalties and partially allowed the appeal while rejecting it in part.