2006 (4) TMI 22 - AT - Service Tax

Service Tax - Security Agency - The appellant failed to include the certain elements for payment of service tax such as provident fund, contribution of ESI, gratuity, bonus etc - Penalty reduced

Summary

Issues:
- Appellant's failure to include certain elements for service tax payment
- Imposition of penalties under Sections 76 and 79 of the Finance Act, 1994
- Challenge to the imposition of penalties
- Appellant's contention of bona fide belief for non-inclusion of amounts
- Department's argument of suppression of facts by the appellants
- Applicability of Section 80 for waiver of penalty
- Discretion in imposing penalty under Section 76 of the Finance Act

Analysis:

The appellant, a holder of registration for service tax payment, failed to include elements like Provident Fund, ESI Contribution, Gratuity, and Bonus while paying service tax for a specific period. The Revenue initiated penal action and recovery proceedings for the unpaid service tax. The appellant argued that the amounts were omitted based on a bona fide belief and not with an intent to evade tax. The lower authority confirmed the service tax and imposed penalties under Sections 76 and 79 of the Finance Act, which the appellant contested.

During the proceedings, the appellant's advocate highlighted Section 80 of the Act, which allows for the waiver of penalties when service tax is not paid due to a genuine belief. The Revenue, represented by the Jt. CDR, contended that the appellants had not provided all necessary information, alleging suppression of facts, and invoked penalty under Section 76 of the Finance Act.

The appellant's counsel referenced a judgment by the Hon'ble High Court of Karnataka, emphasizing the discretionary nature of penalties under Section 76 of the Act. After considering the arguments and facts of the case, the Tribunal acknowledged the appellant's violation in omitting certain elements for service tax payment. However, in the interest of justice, the Tribunal decided to reduce the penalties imposed under Sections 76 and 79 from Rs. 50,000 to Rs. 10,000 and from Rs. 14,000 to Rs. 5,000 respectively. The stay application and appeal were disposed of accordingly.

In conclusion, the Tribunal upheld the lower authorities' orders regarding the violation but exercised discretion to reduce the penalties considering the circumstances of the case, ultimately ensuring justice was served.