2010 (1) TMI 145 - AT - Service Tax

Demand of service tax interest and penalty - transportation rendered by truck owners themselves to HPCL - demand of Service Tax of 6, 47, 98, 642/- - The appellant has obtained clearance from Committee on Disputes (COD). As per the clearance the appellant is allowed to contest only the interest and penalty adjudged in the impugned order. Interest demand is on service tax found due under Goods Transport Agency (GTA) service from HPCL. - The appellant was under bonafide belief that they were not liable to pay Service Tax on the service availed by them. As soon as the liability was clarified by the CBEC they paid service tax after registering with the department. Hence there was no intention of the part of the appellant to evade the payment of service tax. Held that We find that the liability to service tax on the activity of transportation of petroleum products by truck owners for HPCL was pending for clarification before the CBEC till 30.1.2006. The appellant had made a representation for clarification on 23.2.2005. After obtaining the clarification the appellant got registration with the department and paid the service tax due immediately. As the liability to service tax demanded is not contested liability to interest confirmed as per law is sustainable. However we find that no penalty is liable to be imposed on HPCL as they had rightly believed that the activity impugned was not exigible to service tax. Consequently penalties are liable to be vacated.

Summary

Issues:
Appeal against demand of Service Tax, liability for interest and penalties under Sections 76, 77 & 78 of the Finance Act, 1994.

Analysis:
The appeal was filed by M/s. Hindustan Petroleum Corporation Ltd. (HPCL) challenging the demand of Service Tax amounting to Rs.6,47,98,642/- along with interest and penalties under Sections 76, 77 & 78 of the Finance Act, 1994. The appellant had obtained clearance from the Committee on Disputes, allowing them to contest only the interest and penalty adjudged in the impugned order related to Goods Transport Agency (GTA) service. The appellant argued that they were not liable to pay Service Tax on the transportation service provided by truck owners to them, as they were under a bona fide belief that the service was not taxable. They highlighted the clarification received from CBEC regarding the liability to pay Service Tax and emphasized their prompt payment after registration with the department. The appellant contended that there was no intention to evade payment, citing relevant case laws supporting their position.

The Revenue, represented by Shri R.K. Mahajan, argued that the appellant intentionally avoided paying the service tax by not registering for it, despite having registrations for other outlets. They asserted that the liability for interest automatically accrued and referenced legal precedents to support their claim. The Revenue contended that no written notice was required for the confirmation of interest, as it was a liability arising by operation of law. They also argued that mandatory penalties could not be reduced even in the absence of mens rea.

After hearing both sides, the Tribunal found that the liability to service tax on the transportation of petroleum products by truck owners for HPCL was pending clarification before the CBEC until a certain date. The appellant had made a representation seeking clarification and promptly paid the service tax upon receiving the clarification and registering with the department. The Tribunal held that while the liability for service tax and interest was confirmed as per law, no penalty could be imposed on HPCL as they genuinely believed the service was not taxable. Therefore, the penalties imposed were set aside, and the appeal was partly allowed.

In conclusion, the Tribunal's decision was based on the appellant's good faith belief regarding the tax liability, prompt compliance upon clarification, and absence of intent to evade payment. The judgment emphasized the importance of clarity in tax regulations and the significance of timely compliance once the liability is established.