2018 (6) TMI 1486 - AT - Service Tax

Penalty u/s 78 - payment of service tax liability on being pointed out - Manpower Recruitment and Supply Agency Services - ground taken by appellant is being an illiterate person and located in a rural area and was not aware the liability to service tax during the period - Held that - The service tax liability on Manpower Recruitment and Supply Agency Services was introduced from 16.06.2005 and the issue was very much confusing and it is possible that the appellant from rural area may not have access to an expert advice regarding on taxability of services - the appellant has put forth justifiable reason for invoking the provision of Section 80 of the Finance Act, 1994 - penalty set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against penalty imposed under Section 78 of the Finance Act, 1994 for service tax liability on "Manpower Recruitment and Supply Agency Services" during the period from June 2005 to February 2007.

Analysis:
The appellant, engaged in providing "Manpower Recruitment and Supply Agency Services," had discharged the service tax liability for the period in question. The matter was remanded to the first appellate authority, who confirmed the penalty imposed under Section 78 of the Finance Act, 1994. The appellant appealed to the Tribunal solely seeking a waiver of the penalty.

During the proceedings, the appellant argued that there was confusion regarding the tax liability on such services during the relevant period and claimed to have paid the entire tax liability, interest, and penalty under section 77. Citing precedents like Jashbhai M. Parmar and Sudha Engineering Co., the appellant sought the penalty to be set aside invoking Section 80 of the Finance Act, 1994.

The Departmental Representative reiterated the first appellate authority's decision to impose the penalty under Section 78 of the Finance Act, 1994.

Upon careful consideration, the Tribunal found that the appellant, being illiterate and located in a rural area, may not have been aware of the service tax liability during the period in question. Given the confusion surrounding the taxability of the services and the appellant's prompt payment upon being informed, the Tribunal referenced previous cases where penalties were set aside under similar circumstances. Consequently, invoking Section 80 of the Finance Act, 1994, the Tribunal set aside the penalty imposed under Section 78, allowing the appeal.

In conclusion, the Tribunal allowed the appeal, setting aside the penalty imposed under Section 78 of the Finance Act, 1994, based on the appellant's justifiable reasons and the confusion surrounding the tax liability during the relevant period.