2009 (9) TMI 205 - AT - Service Tax

Penalty - failure to pay service tax - appellants further contended that the appellants were under the belief that the appellant is not covered under the service tax in the category of Business Auxiliary Services , which was introduced from 1-7-2003 but he was under a bona fide belief that the services rendered by the appellant is of commission agent service and which was brought into the net of the service tax with effect from 10-9-2004 - the appellant is entitled to get the relief as per the provisions of Section 80 of the Finance Act Held that appellants were under bona fide doubt regarding their activity, was a reasonable cause on their part not to depositing the service tax in the penalties under Section 76, 77 & 78 of the Finance Act, not imposable.

Summary

Issues:
- Imposition of penalty under Sections 76, 77, and 78 of the Finance Act, 1994 for failure to pay service tax and furnish prescribed returns.
- Applicability of penalty due to alleged suppression of facts by the appellant.
- Bona fide belief of the appellant regarding the applicability of service tax on their services.

Analysis:

Issue 1: Imposition of Penalty
The appellants were penalized for failure to pay service tax on taxable services, failure to furnish prescribed returns, and under Section 78 of the Finance Act, 1994. The Commissioner directed the revision of the order-in-original to include penalties. However, the appellants argued that they had already paid the service tax and interest, and penalties should not be imposed as there was no suppression of facts and they acted in good faith.

Issue 2: Alleged Suppression of Facts
The Revenue contended that the appellants, being a large firm, could not claim a bona fide belief to avoid penalties. They argued that the appellants suppressed facts from the department, leading to the imposition of penalties. The Revenue relied on a previous case to support their stance that the appellants had indeed suppressed material facts by not disclosing their consulting services until after a departmental inquiry.

Issue 3: Bona Fide Belief
The appellants claimed they believed their services were not covered under "Business Auxiliary Services" and acted in good faith. They argued that penalties should not apply as they had a reasonable cause for not depositing the service tax on time. The appellants cited precedents where penalties were waived due to reasonable causes and bona fide doubts about tax applicability.

In the judgment, the Member (J) noted that the arguments presented by the Revenue lacked merit, and the appellants were entitled to relief under Section 80 of the Finance Act. Citing precedents, the Member held that the appellants' bona fide doubt about their activities justified the non-imposition of penalties under Sections 76, 77, and 78 of the Finance Act. Consequently, the impugned order was set aside, and the appeal was allowed in favor of the appellants with any consequential relief.