2018 (4) TMI 1324 - AT - Service Tax

Penalty - activity rendered by the appellant is of purchasing of prepaid sim cards from M/s. TPCL and selling them to the ultimate customer - tax with interest discharged before issuance of SCN - Held that - the issue rendered in this case pertains to service tax liability on the commission received, which has been a recurring dispute before the Tribunal in various matters - the appellant could have extended the bonafide belief that there is no liability for services rendered during the relevant period - penalty set aside by invoking section 80 - appeal allowed in part.

Summary

Issues:
Service tax liability on commission received by the appellant, imposition of penalties under various sections of the Finance Act, 1994, interpretation of provisions of the statute, applicability of section 80 of the Finance Act, 1994.

Analysis:

1. The appellant, a distributor of a communication company, was issued a show cause notice for alleged service tax liability on received commission. The Adjudicating Authority confirmed the demand, imposed penalties under various sections, and late fees for delayed filing of returns. The Commissioner (Appeals) upheld the order, leading to the present appeal before the tribunal.

2. The appellant argued that the transactions were on a principal-to-principal basis, and since the communication company discharged sales tax, no service tax was applicable. The appellant promptly paid the service tax and interest before the notice was issued. The appellant contended that penalties should not have been imposed, citing lack of mens rea and interpretation of statutory provisions.

3. After hearing both sides and examining the records, the tribunal noted that the appellant had cleared the service tax liability and interest before the notice. The core issue was whether the commission received was subject to service tax, a recurring dispute. The tribunal referred to a previous case and held that such transactions amounted to rendering services. However, considering the appellant's genuine belief in non-liability, the tribunal extended the benefit of section 80 of the Finance Act, 1994.

4. Consequently, the tribunal set aside the penalties imposed under sections 78, 77(1)(a), 77(1)(c), and section 70 of the Finance Act, 1994. The appellant's valid reasons for contesting the penalties were acknowledged, leading to the partial allowance of the appeal. The tribunal's decision was based on the appellant's timely payment of the service tax, genuine belief, and compliance with statutory requirements.

5. In conclusion, the tribunal partially allowed the appeal, setting aside the penalties under specific sections of the Finance Act, 1994, based on the appellant's compliance, genuine belief, and valid reasons presented during the proceedings.