2010 (4) TMI 188 - AT - Service Tax

Penalty- The appellants are challenging imposition of penalties under Sections 76 77 & 78 on the ground that the appellants did not obtain the registration for providing security services and thereby evaded the service tax during the period from 1998 to 2002. Held that- the appellant is proprietary firm and the total amount liable to be paid is Rs.1, 70, 930/- for the period of more than 3 years and the appellants obtained the registration voluntarily and paid the service tax and interest without waiting for issuance of show cause notice and also has not contested the service tax liability I consider that a lenient view is required to be taken in this case as per the provisions of Section 80 of Finance Act 1994. In view of the above discussion the penalties imposed under Sections 76 77 and 78 of Finance Act 1994 are set aside and the appeal allowed.

Summary

Issues:
Challenge to imposition of penalties under Sections 76, 77 & 78 of Finance Act, 1994 for failure to obtain registration for providing security services and evading service tax.

Analysis:
The appellant challenged penalties under various Sections of the Finance Act, 1994, arguing that they were unaware of the service tax liability and voluntarily obtained registration once they became aware. The appellant, a proprietary firm providing security services, applied for registration in 2002 upon realizing the liability. The department's show cause notice mentioned that the appellant was providing security services during an audit of another company, but there was no evidence of the department informing the appellant to obtain registration or discharge tax liability before the registration application. The Commissioner (Appeals) noted that the appellant voluntarily obtained registration and paid the service tax and interest before the show cause notice was issued. The appellant had also paid a penalty of Rs.500 under Section 75A along with the tax and interest.

Considering the appellant's voluntary registration, payment of tax, and lack of contesting the liability, the Tribunal invoked Section 80 of the Finance Act, 1994, to take a lenient view. The total amount due was Rs.1,70,930 for over three years, and the appellant's proactive approach in fulfilling tax obligations warranted setting aside the penalties under Sections 76, 77, and 78 of the Finance Act, 1994. The appeal was allowed, and the penalties were revoked.

This judgment highlights the importance of voluntary compliance with tax obligations and the significance of proactive measures in addressing liabilities to avoid penalties under the relevant provisions of the Finance Act, 1994.