2008 (1) TMI 132 - AT - Service Tax

Penalty u/s 76, 77 & 78 imposed by comm.(A) in review order - bona fide belief that solemnization of marriage is a religious function, therefore, is not covered under the scope of Mandap Keeper - Section 80 of Finance Act provides that no penalty shall be imposable if reasonable cause for the said failure is shown - appellant comes under the explanation provided under Section 80 which include the social function such as marriage in the scope of Mandap Keeper service penalty set aside

Summary

Issues:
- Imposition of penalty under Section 76, 77, and 78 of Finance Act
- Applicability of Service Tax on the service of Mandap Keeper
- Interpretation of the explanation added to Section 60 of the Finance Act
- Applicability of Section 80 of the Finance Act regarding penalties

Imposition of Penalty:
The appellant appealed against the imposition of penalties under Section 76, 77, and 78 of the Finance Act by the Commissioner of Central Excise. The appellant had paid the Service Tax demand along with interest but contested the penalties imposed. The adjudicating authority initially dropped the penalty proceedings, which were later revived by the Commissioner.

Applicability of Service Tax:
The appellant argued that they believed solemnization of marriage to be a religious function and not covered under the Mandap Keeper service taxable under Service Tax. They relied on an explanation added to Section 60 of the Finance Act in 2007, which clarified that social functions, including marriage, fall under the Mandap Keeper service. The appellant contended that they were not liable for Service Tax or penalties before this clarification.

Interpretation of Explanation:
The appellant's argument was based on the interpretation of the explanation added to Section 60 of the Finance Act, which expanded the scope of Mandap Keeper service to include social functions like marriage. They claimed that their belief about the religious nature of marriage ceremonies absolved them from liability before the clarification. The Revenue, however, insisted that the appellant's compliance with paying Service Tax and providing Mandap Keeper services made them liable for penalties.

Applicability of Section 80:
The Tribunal considered Section 80 of the Finance Act, which states that no penalty shall be imposed if the assessee proves a reasonable cause for the failure. In this case, the explanation in the Finance Act regarding the scope of Mandap Keeper service was crucial. The Tribunal found that the appellant fell within the scope of Section 80 due to the clarification regarding social functions like marriage. Consequently, the imposition of penalties was set aside, and the appeal was allowed.

This judgment highlights the importance of clarifications in tax laws and the impact of such explanations on the liability of taxpayers for penalties. The Tribunal's decision rested on the interpretation of statutory provisions and the appellant's reasonable belief based on the existing legal framework.