2008 (1) TMI 241 - AT - Service Tax

Appellants received commissions from the financier in respect of the cars financed by them - appellants were not aware of the clear legal position, but once they know that this service is taxable under the category of business auxiliary service w.e.f. 1st July, 2003 they on their own discharged the entire service tax liability - Section 78 cannot be invoked at all because there is no fraud, suppression of facts or collusion - pre-deposit of the penalties is waived

Summary

Issues:
1. Taxability of services provided by the appellants
2. Imposition of penalties under various sections of the Finance Act, including Section 78

Analysis:
1. Taxability of services provided by the appellants:
The appellants provided authorized dealer services and business auxiliary services. While there was no dispute regarding the authorized dealer services, the appellants were unaware of the tax liability for business auxiliary services until they were informed in 2003. Subsequently, they voluntarily paid the entire service tax liability of Rs. 79,67,976 on two occasions. However, the department issued a show cause notice after a significant delay, imposing penalties under different sections of the Finance Act. The appellants argued that Section 78, which deals with penalties, should not be invoked as there was no fraud, suppression of facts, or collusion on their part. The Departmental Representative contended that the appellants should have paid the tax from July 2003 and cannot avoid legal consequences.

2. Imposition of penalties under various sections of the Finance Act, including Section 78:
The penalties imposed on the appellants included Rs. 100 per day under Section 76, Rs. 1000 for non-filing of return and not obtaining registration under Section 77, and a substantial penalty of Rs. 79,67,977 under Section 78. The appellants argued against the invocation of Section 78, emphasizing their proactive payment of the service tax liability even before the show cause notice was issued. The Tribunal acknowledged that the appellants had fulfilled their tax liability promptly upon realizing their obligation. Considering the circumstances and legal contentions presented, the Tribunal found merit in the appellants' case and decided to waive the pre-deposit of the penalties, indicating a favorable stance towards the appellants during the final hearing.

In conclusion, the judgment by the Appellate Tribunal CESTAT, New Delhi addressed the taxability of services provided by the appellants and the imposition of penalties under various sections of the Finance Act. The Tribunal recognized the appellants' proactive approach in discharging their tax liability for business auxiliary services and decided to waive the pre-deposit of penalties, indicating a favorable inclination towards the appellants' legal contentions.