2009 (12) TMI 165 - AT - Service Tax

Penalty- The assessee are aggrieved by the imposition of penalties under the provisions of section 76 and 78, while the revenue has filed an appeal against the reduction of penalties. In light of the decision of R. Sukumar v. CCE 2008 -TMI - 4702 - CESTAT, CHENNAI, held that- there is no suppression with intent to evade payment of tax thus set aside the penalty and allow the appeal.

Summary

Issues:
Imposition of penalties under sections 76 and 78 of the Finance Act, 1994; Reduction of penalties; Entitlement to avail Cenvat credit; Knowledge of service tax liability; Applicability of extended period of limitation.

Analysis:
The judgment concerns an appeal related to the imposition of penalties under sections 76 and 78 of the Finance Act, 1994. The assessees contested the penalties, while the revenue appealed against the reduction of penalties. The total liability was Rs. 2,04,124, out of which Rs. 1,85,657 had been paid, leaving a balance of Rs. 18,657. The assessees sought to produce documentary evidence to claim credit of Rs. 15,029, but this plea was rejected as belated with no supporting documents submitted to establish their eligibility for Cenvat credit. The Tribunal held the assessees liable to pay the balance amount of Rs. 18,657.

Regarding penal action, the Tribunal ruled in favor of the assessees, stating that they were not aware of the service tax liability during the period of non-payment. The lack of evidence to prove their knowledge of the liability led the Tribunal to conclude that penal action was not justified. Citing a previous decision in R. Sukumar v. CCE, the Tribunal found no intention on the part of the assessees to evade tax payment. Consequently, the penalties imposed on the assessees were set aside.

In terms of the specific appeals, Appeal No. S/182/2008 was partly allowed, upholding the demand of Rs. 18,657 but setting aside the penalties. On the other hand, Appeal No. S/169/2008, which sought to enhance penalties, was dismissed in light of the decision made in the assessees' appeal. The judgment provides a detailed analysis of the liabilities, entitlement to credit, knowledge of tax obligations, and the justification for setting aside penalties based on the assessees' lack of awareness regarding the service tax liability.