2018 (6) TMI 795 - AT - Service Tax

Penalty u/s 77 and 78 - Cable Operator Service - It emerged that the amounts declared in the ST-3 returns were much lower than that paid to the link operator and the subscription collected - Held that - The appellants were brought into the service tax net by the Finance Act, 2002 w.e.f 16.08.2002 by the introduction of Section 65 (22) read with Section 65 (105)(zs) of the Finance Act, 1994 - In absence of any specific evidence for the department, collection amount as voluntarily disclosed by the appellant should have been accepted. There is no allegation of suppression in the SCN. Reliance placed in the case of Polimer Cable Network Vs. CCE, Salem 2018 (2) TMI 402 - CESTAT CHENNAI , where it was held that in respect of an assessee neither receiving television signals nor involved in distribution of such signals, but merely being an intermediary between MSO and franchisees (Local Cable Operator), and entertained bona fide belief of non-leviability of tax on them as Cable Operator, penalty not imposable under Sections 77 and 78 of Finance Act, 1994. The penalties imposed on the appellants under Section 76, 78 and 78 of the Finance Act, are set aside without disturbing the demand and interest - appeal allowed.

Summary

Issues:
1. Imposition of penalty under various provisions of the Finance Act, 1994 for service tax liability discrepancies.

Analysis:
The case involved M/s. Star Vision Cable Network, a cable operator receiving signals from a multisystem operator. The appellants voluntarily registered with the service tax department and paid tax on the amount retained. However, discrepancies were found in the amounts declared in their ST-3 returns compared to actual collections. A show cause notice was issued for service tax demand, interest, and penalties. The Order-in-Original confirmed the proposals, which were upheld by the Commissioner (Appeals).

2. Contesting penalty imposition:
The appellant's representative argued that penalties should be set aside as the appellants were new to service tax laws and had confusion regarding taxability and valuation. They believed service tax was only leviable on the amounts retained by them. It was emphasized that there was no intent to evade tax, and they had filed returns and discharged tax liability. Reference was made to case laws where penalties were waived for cable operators in similar situations.

3. Department's stance and arguments:
The department contended that the appellants contravened various sections of the Finance Act by not filing returns, short-paying taxes, and delaying filings. Penalties under Sections 76, 77, and 78 were justified as per the adjudicating authority and the Commissioner (Appeals).

4. Tribunal's findings and decision:
Upon review, the Tribunal noted that the appellants were brought under the service tax net in 2002. Lack of specific evidence for the department's claims led the Tribunal to accept the voluntarily disclosed collection amount. Notably, the appellants contested only the penalties. Citing precedents, the Tribunal found that penalties were not warranted as the appellants acted as intermediaries and had a bona fide belief regarding tax liability. Following the precedent, penalties under Sections 76, 77, and 78 were set aside, while the demand and interest were upheld.

5. Conclusion:
The Tribunal allowed the appeal, setting aside the penalties imposed under various sections of the Finance Act, 1994, based on the appellants' role as intermediaries and their genuine belief about tax liability. The decision highlighted the importance of considering the specific circumstances and legal interpretations in penalty assessments for service tax discrepancies.