2010 (6) TMI 42 - AT - Service Tax

Penalty - Security Service bonafide belief - Appellant is a security service provider and is duly registered with the service tax department. They are paying the service tax on all the security services rendered to individuals and private persons. However in respect of services rendered to government organizations like Municipal Corporation of Rajkot and GIDC etc. they did not pay the service tax. As per the appellant the tax was not paid under a bonafide belief that as the service is to government organization, no tax is liable to be paid. Held that reflecting upon his bonafide impression, penalty set aside.

Summary

Issues:
1. Imposition of penalties on the appellant for non-payment of service tax on services rendered to government organizations.
2. Appellant's contention of bonafide belief regarding the tax liability on services provided to government organizations.
3. Confirmation of service tax payment by the appellant.
4. Decision on setting aside the penalties imposed.

Analysis:
1. The appellant, a security service provider, did not dispute the confirmation of service tax against them but contested the penalties imposed on them for not paying service tax on services provided to government organizations like Municipal Corporation of Rajkot and GIDC. The appellant argued that they believed, in good faith, that no tax was liable to be paid for services to government organizations and that they did not charge any tax from the service takers. They promptly paid the tax upon direction from the department, without contesting it, even though it was beyond the limitation period.

2. The tribunal acknowledged the appellant's bonafide belief regarding the tax liability on services rendered to government organizations. It was noted that the appellant diligently paid taxes for services to private individuals and could have invoiced the government organizations for service tax, which would have been paid by them and deposited with the Revenue. The tribunal found that the appellant did not profit from not following this route, indicating a genuine misunderstanding on their part. Consequently, the penalties imposed on the appellant were set aside based on the belief that there was no suppression or misstatement on their part.

3. The tribunal confirmed the service tax payment by the appellant, which was not contested, and acknowledged that the appellant immediately complied with the department's directive to pay the tax for services provided to government organizations. Despite confirming the demand with interest, the tribunal decided to waive the penalties considering the appellant's bonafide belief and prompt action upon being informed of the tax liability.

4. In conclusion, the appellate tribunal disposed of the appeal by confirming the service tax payment by the appellant, setting aside the penalties imposed, and emphasizing the appellant's bonafide belief regarding the tax liability on services provided to government organizations. The decision reflected a fair consideration of the circumstances and actions taken by the appellant in response to the tax liability issue.

This detailed analysis of the judgment highlights the key issues, arguments presented, tribunal's findings, and the final decision regarding the imposition of penalties on the appellant for non-payment of service tax on specific services provided to government organizations.