2007 (11) TMI 250 - AT - Service Tax

Grinding Dead Burnt Magnesite (DBM) lumps into powder for its customers and collected charges for the above service ignorance of the scope of the new levy Business Auxiliary Service under which grinding of DBM for a fee was classified by the department assessee paid the service tax when it became certain about its liability no suppression - sufficient cause shown - appellant deserves the benefit of the provisions contained in section 80 - penalty imposed u/s 76 is set aside

Summary

Issues:
1. Penalty imposed under sections 76, 77, and 78 of the Finance Act, 1994 for non-payment of service tax.
2. Applicability of penalty provisions based on the circumstances of the case.
3. Benefit of section 80 of the Finance Act, 1994 in cases of non-payment of tax due to ignorance.

Analysis:

Issue 1: Penalty under sections 76, 77, and 78
The case involved a service tax demand of Rs. 4,74,416 from the appellant for Business Auxiliary Services rendered. The original authority imposed penalties under sections 76, 77, and 78 of the Finance Act, 1994. The Commissioner (Appeals) modified the penalties, reducing the amount under section 76 and upholding the penalty under section 77, while vacating the penalty under section 78. The Tribunal decided to hear the appeal on its merits.

Issue 2: Circumstances leading to non-payment of service tax
The appellant, engaged in grinding Dead Burnt Magnesite lumps into powder, had not followed statutory formalities or paid the service tax due until a later date. They sought clarification on their liability, which they received after taking registration in March 2005 and paid the tax in July 2005 before a show-cause notice was issued. The Commissioner (Appeals) considered factors such as no suppression of facts, prompt furnishing of information, and payment of arrears before the notice, leading to a reduction in penalties under sections 76 and 78.

Issue 3: Benefit of section 80 in cases of non-payment due to ignorance
The Tribunal found that the non-payment of service tax was due to the appellant's ignorance of the new levy for Business Auxiliary Service. Considering that there was no suppression of facts, timely provision of information, and payment upon clarity of liability, the Tribunal applied section 80 of the Finance Act, 1994. Section 80 empowers the proper officer not to impose a penalty in cases where sufficient cause exists for non-payment. Consequently, the penalty under section 76 was set aside, and the impugned order was upheld, granting the appellant the benefit of section 80.

This detailed analysis of the judgment highlights the issues of penalty imposition, circumstances leading to non-payment of service tax, and the application of section 80 in cases of ignorance, providing a comprehensive overview of the legal aspects addressed in the case.