2018 (6) TMI 525 - AT - Service Tax

Penalty - renting of immovable property service - interpretational issue - bona fide belief - Held that - the issue involved is interpretational issue, and also there was bona fide belief on the part of assessee, the imposition of penalty is unwarranted - Further, the appellant had discharged substantial part of the service tax much prior to the issuance of the SCN - penalty not warranted - appeal allowed.

Summary

Issues:
1. Liability to pay service tax under the category of 'Renting of Immovable Property Services' on storage and warehousing services.
2. Imposition of penalty under section 78 for non-payment of service tax.

Analysis:
1. The appellants, registered under 'Transport of Goods by Road' and other services, were issued a show cause notice for not discharging service tax under 'Renting of Immovable Property Services.' The original authority confirmed a demand of &8377;26,63,536 along with interest and penalty. In appeal, the Commissioner reduced the demand to &8377;17,57,430 and allowed a reduced penalty of 25%. The appellant contested the penalty, claiming a bonafide belief that their services did not fall under the said category.

2. The appellant's counsel argued that there was no intention to evade payment, and the issue was interpretational. The AR reiterated the findings of the impugned order. After hearing both sides, the Tribunal noted that the appellant was not contesting the service tax demand or interest. The Tribunal considered the bonafide belief of the appellants regarding the nature of their services and found the imposition of penalty unwarranted. The appellant had already paid a substantial part of the tax before the show cause notice, leading the Tribunal to set aside the penalty while upholding the service tax demand and interest.

3. The Tribunal concluded that the penalty was not justified in the circumstances, given the appellant's belief and prior payment of a significant portion of the tax. The impugned order was modified to remove the penalty, ensuring no disturbance to the service tax demand or interest. The appeal was partly allowed with consequential relief, if any, for the appellant. The operative portion of the order was pronounced in open court.