2018 (9) TMI 42 - AT - Service Tax

Penalty - payment of Service tax before issuance of SCN - also before Final Order interest and portion of penalty was paid - Cable Operator Service - case of appellant is that thy have not paid the service tax under the impression that when the principal signal supplier is paying the service tax, then Cable TV operator need not pay service tax again on the said services - invocation of section 80. Held that - The appellant as per the impugned order is entitled to CENVAT credit for payment of service tax. Further the appellant has paid the substantial amount before the issue of show-cause notice and some of the amount has been paid before the Final Order was passed along with interest and penalty, the details of which has been given by him in the grounds of appeal. Further, the appellant has stated that he has paid 25% of penalty on 29.03.2011. Further, the appellant being a small businessman and is not having adequate knowledge of the Act and the Service Tax Rules and paid the entire amount along with interest and 25% of the penalty, therefore, he is entitled to the benefit of Section 80 of the Finance Act 1994 as there was a reasonable ground for failure to pay the duty in time. Penalty set aside by invoking section 80 - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Appeal against Commissioner (Appeals) order dated 01.05.2012
- Service tax demand for the period October 2003 to December 2008 and April 2009 to December 2009
- Imposition of penalties under Sections 76, 77, and 78 of the Finance Act
- Appellant's contention of not being liable for equal penalty under Section 78 due to bona fide belief
- Appellant's claim for cenvat credit and benefit of Section 80 of the Finance Act

Analysis:

The present appeals were directed against a common impugned order passed by the Commissioner (Appeals) upholding the Order-in-Original with modifications. The appeals were disposed of together due to identical issues. The appellant, a Cable TV operator, received signals from service providers and provided Cable TV connections to customers. The Department issued show-cause notices demanding service tax for the period in question along with interest and proposed penalties. The Adjudicating authority confirmed the demand, interest, and imposed penalties under Sections 76, 77, and 78 of the Finance Act. The appellant contended that they believed they were not required to pay service tax if the main signal supplier did, but upon realizing their mistake, paid the tax, interest, and 25% penalty. The appellant sought cenvat credit and argued against the imposition of equal penalty under Section 78, citing lack of intent to evade tax and their limited understanding of tax laws.

The appellant argued that the impugned order was contrary to facts and law, emphasizing their payment of service tax, interest, and partial penalty upon realizing the error. They sought the benefit of cenvat credit and Section 80 of the Finance Act, claiming a lack of intent to evade tax and their status as a small businessman with limited knowledge of tax laws. The appellant cited precedents where penalties were set aside for similar circumstances. The Department reiterated the findings of the impugned order.

After hearing both parties and reviewing the evidence, the Tribunal found that the appellant was entitled to cenvat credit for service tax payment and had made substantial payments before the show-cause notice. Considering the appellant's limited understanding of tax laws and their prompt payment upon realization, the Tribunal granted the benefit of Section 80 of the Finance Act, setting aside the impugned order. The Tribunal acknowledged the appellant's efforts to rectify the error and their genuine belief regarding service tax liability, thus relieving them of the equal penalty under Section 78.

In conclusion, the Tribunal allowed the appeals, giving the appellant the benefit of Section 80 of the Finance Act, considering their reasonable grounds for the delayed payment of duty and their efforts to rectify the situation promptly. The order was pronounced in open court on 30/08/2018.