2007 (12) TMI 48 - AT - Service Tax

Security service - lapse in paying tax in time - lower appellate authority had rendered a finding that service tax being a new levy, there was confusion in the minds of assessee & department - Section 80 of the Finance Act empowers the proper officer to condone the failures in complying with the provisions by assessee after he was satisfied that reasonable cause for such failure existed Penalty was rightly waived by exercising discretion under section 80

Summary

Issues:
1. Imposition of penalty under Section 76 on the service provider for not paying collected service tax to the government.
2. Commissioner (Appeals) modifying the penalty imposed under Section 76.
3. Appeal by Revenue to restore the penalty vacated by the Commissioner.

Analysis:
1. The service provider collected service tax but did not pay it to the government, leading to the imposition of a penalty of Rs.82,819 under Section 76. The Commissioner (Appeals) modified the penalty, vacating the amount imposed. The Revenue appealed to reinstate the penalty.

2. The Revenue argued that the penalty waiver was based on irrelevant considerations, emphasizing that the service provider knowingly withheld the tax. The Revenue contended that the penalty was justified and should be restored.

3. The service provider's counsel explained that until 2003, the organizations availing the services paid the security guards' salaries, assuming they were also responsible for the service tax. It was only in 2003 that the service provider began paying the service tax. The counsel requested leniency due to unfamiliarity with the new levy's formalities.

4. Upon reviewing the case records and submissions, it was noted that the lower appellate authority recognized the confusion surrounding the new service tax levy, acknowledging the complexity of procedural formalities. The authority exercised discretion under Section 80 of the Finance Act to waive the penalty under Section 76. Section 80 allows for condoning failures in compliance when a reasonable cause is established. Consequently, the judgment dismissed the Revenue's appeal, affirming the waiver of the penalty.

This detailed analysis of the judgment highlights the issues of penalty imposition, modification by the Commissioner, and the decision to uphold the penalty waiver based on the circumstances and provisions of the Finance Act.