2009 (3) TMI 286 - AT - Service Tax

Commissioner (Appeals) has set aside the penalties imposed on the respondent and the interest u/s 75 by invoking the inherent powers u/s 80 of the Finance Act, 1994. Respondents have been claiming before the adjudicating authority that they were ignorant of the Act that link operators have to pay Service Tax and have to maintain books of accounts, that the non-maintenance of books of accounts was due to ignorance of the law, regarding the payment of Service Tax and not on deliberate intention. Adjudicating authority has not given findings as regards the reasonings put forth by the respondent before him for non-payment of Service Tax dues to ignorance of law. respondent situated in rural area and not aware of provisions of the law - Accordingly, the impugned order to the extent it sets aside the penalties u/s 76, 77 & 78 is upheld as being legal and proper. - Since the respondents has not challenged the interest portion before the ld. Commissioner (Appeals) nor has he filed any cross-objection here, we are of the considered view that the interest liability has to be fastened upon the respondent for non-payment of the Service Tax dues in time. Revenue s appeal is allowed partly.

Summary

Issues:
1. Non-payment of Service Tax by the respondent for providing cable operator services.
2. Imposition of penalties and interest under Section 75, 76, 77, and 78 of the Finance Act.
3. Applicability of Section 80 for setting aside penalties.
4. Liability of the respondent for interest on the amount that escaped tax.

Analysis:
1. The case involved the respondent providing taxable services as a cable operator without registration or payment of Service Tax initially. Upon detection by the Preventive Unit, the respondent obtained registration and paid the Service Tax with interest. The adjudicating authority confirmed the demand for Service Tax, interest, and imposed penalties under various sections of the Finance Act. The Commissioner (Appeals) set aside the penalties but imposed liability under Section 75 based on tribunal decisions. The Revenue appealed against this decision.

2. The Jt. CDR argued that the respondent had intentionally suppressed collected amounts, failed to obtain registration, and did not pay Service Tax or file returns. The Tribunal noted that the respondent claimed ignorance of the law regarding Service Tax payment and bookkeeping. The adjudicating authority imposed penalties for non-disclosure and escapement of assessment without addressing the respondent's ignorance claim. The Tribunal found that the penalties were set aside by the Commissioner (Appeals) invoking Section 80 due to the respondent's rural location and potential lack of awareness of legal provisions, upholding the decision as legal and proper.

3. Regarding the interest amount, the Tribunal observed that it is payable on the escaped tax amount. As the respondent did not challenge the interest before the Commissioner (Appeals) or file a cross-objection, the Tribunal held the interest liability should be imposed on the respondent for non-payment of Service Tax on time. Thus, the Tribunal set aside the decision to relieve the respondent of interest liability, partially allowing the Revenue's appeal and modifying the impugned order accordingly.

In conclusion, the Tribunal upheld the setting aside of penalties under Section 80 due to the respondent's claimed ignorance but reinstated the interest liability on the respondent for non-payment of Service Tax. The impugned order was modified to reflect these decisions, partially allowing the Revenue's appeal.