2008 (2) TMI 138 - AT - Service Tax

Appellant is engaged in the facilitation and promotion of business of prepaid and postpaid connections ob behalf of principals on commission basis - Revenue proceeded against the appellant on the ground that they did not discharge service tax liability under the category of Business Auxiliary Services Assessee doubtful about liability revenue neutral position intention to evade duty not proved penalty not imposable

Summary

Issues:
1. Liability of the appellant for service tax under "Business Auxiliary Services" category.
2. Imposition of penalty under various sections of the Finance Act, 1994.
3. Applicability of an amnesty scheme announced by the Government.
4. Allegation of suppression of facts by the lower authority.

Analysis:

Issue 1:
The appellant was engaged in facilitating and promoting the business of prepaid and postpaid connections of a mobile communications company. The Revenue alleged that the appellant did not discharge their service tax liability under the category of "Business Auxiliary Services." A Show Cause Notice was issued, leading to a demand for service tax and imposition of penalties by the lower authority.

Issue 2:
The appellant contended that they obtained registration during an amnesty scheme period in July 2004 and paid the service tax with interest upon realizing their liability. They argued that they received commissions from their Principals without raising invoices and were unaware of the service tax liability. The Tribunal found that the appellant had a genuine doubt regarding their liability and that the service tax paid could be considered as input credit for their Principals. The Tribunal concluded that there was no intention to evade service tax, and the penalty imposed was deemed harsh and unwarranted.

Issue 3:
The Commissioner (Appeals) upheld the penalty imposition, citing that the interest liability was fulfilled after the end of the amnesty scheme period. However, the Tribunal observed that the appellant acted in good faith upon receiving advice from their Principals to register and raise bills indicating service tax amounts. The Tribunal found that the appellant's actions did not result in any revenue loss, and therefore, the provisions of Section 80 of the Finance Act could be applied in this case.

Issue 4:
Upon careful consideration, the Tribunal concluded that the appellant's doubts regarding their liability were genuine, and there was no evidence of intentional evasion of service tax. The Tribunal set aside the penalty and allowed the appeal, providing consequential relief to the appellant.

In conclusion, the Tribunal found in favor of the appellant, highlighting their good faith efforts to comply with the service tax regulations after realizing their liability. The judgment emphasized the importance of considering the circumstances and intentions of the taxpayer in cases involving tax liabilities and penalties.