2010 (1) TMI 173 - AT - Service Tax

Penalty- Appellant is providing security agency service and service tax demand for Rs. 50, 405 with interest as applicable for the period from 1-4-2000 to 31-3-2005 has been confirmed and penalties have been imposed under various sections of Finance Act 1994. Held that- it is quite clear that the firm is a very small concern. Further the appellant willingly paid service tax and interest the moment it was pointed out to him. Even though it can be said that ignorance of law cannot be an excuse but it can be only one of the factors while considering imposition of penalty. In view of the fact that issue regarding imposition of penalty has been considered in detail and it was found that no penalty is imposable in this case by invoking section 80 of Finance Act 1994 I set aside the impugned order and the penalties imposed on the appellant and allow the appeal.

Summary

Issues:
Service tax demand confirmation, imposition of penalties under Finance Act, 1994, invocation of section 80 for penalty leniency, waiver of pre-deposit requirement, applicability of penalty in the case of a small security agency service provider, legal confusion regarding liability of individual service providers before 2006.

Analysis:

1. Service Tax Demand and Penalties: The appellant, a security agency service provider, faced a service tax demand of Rs. 50,405 with interest for the period from 1-4-2000 to 31-3-2005. Penalties were imposed under various sections of the Finance Act, 1994. The appellant did not contest the service tax and interest but sought leniency on penalties by invoking section 80 of the Finance Act, 1994.

2. Submission and Legal Arguments: The appellant's advocate highlighted that the service provider was an individual who started the business post-retirement, operating from a small setup at home. The appellant promptly paid the service tax and interest upon being informed of the liability. Reference was made to precedents like Shree Khodiyar Security Guard Training & Supplying Services v. CCE and Infinity Credit v. CCE to argue about the confusion regarding the liability of individual service providers before 2006.

3. Decision and Reasoning: The Tribunal considered the appellant's submissions and the quantum of service tax demanded. Despite acknowledging that ignorance of the law cannot be an excuse, the Tribunal noted the small scale of the appellant's business and the immediate payment of service tax and interest upon notification. Citing precedents, the Tribunal found merit in invoking section 80 of the Finance Act, 1994, for leniency on penalties. Consequently, the Tribunal waived the pre-deposit requirement for penalties and proceeded to decide the appeal on its merits.

4. Final Ruling: After detailed consideration, the Tribunal concluded that no penalty was imposable in this case by invoking section 80 of the Finance Act, 1994. Therefore, the impugned order confirming penalties was set aside, and the appeal was allowed in favor of the appellant, relieving them from the imposed penalties.

This judgment underscores the Tribunal's discretion in considering the circumstances of individual service providers, especially in cases of small-scale operations, when determining the imposition of penalties under tax laws. The invocation of section 80 for leniency on penalties and the clarification of legal ambiguities regarding the liability of individual service providers before 2006 were pivotal in the Tribunal's decision to waive penalties and allow the appeal.