2009 (12) TMI 315 - AT - Service Tax

Penalty- that the appellant herein is engaged in the activity of providing services of mechanized processing of cheques, drafts, pay orders, at-part instruments etc., to their various customers like banks, financial institution etc. at various places in the country using MICR technology. It was concluded that the said services fall under the scope of Banking and other Financial Services and attracted levy of service tax. The appellants have already discharged service tax liability before the issuance of show cause notice along with interest. The Commissioner (Appeals) setting aside the penalty. Held that- in the light of the decisions of Punjab National Bank v. CCE, Chandigarh - 2009 -TMI - 33567 - CESTAT NEW DELHI, set aside the penalties imposed on the appellant under Section 76 & 78 by the impugned order.

Summary

Issues:
- Whether the activity of providing services of mechanized processing of cheques falls under Banking and Financial Services?
- Whether the appellant is liable to pay service tax, penalty, and interest?
- Whether the penalties imposed under Sections 76 & 78 of the Finance Act are justified?

Analysis:
1. The appellant provided services of mechanized processing of cheques, drafts, pay orders using MICR technology. A show cause notice was issued demanding service tax, penalty, and interest. The adjudicating authority confirmed the demand and imposed penalties under Sections 76 & 78 of the Finance Act. The appellant challenged this decision.

2. The appellant had already paid the service tax liability along with interest before the show cause notice was issued. They requested leniency from the authorities not to impose penalties. Despite this, penalties were imposed. The appellant contended that the entire demand was time-barred. They sought to set aside the penalties while not contesting the demand for service tax. The tribunal's decision in the case of Punjab National Bank was cited in support.

3. The revenue accepted the tribunal's decision in the case of Punjab National Bank. After considering submissions from both sides, the tribunal analyzed whether the activity of mechanized processing of cheques falls under Banking and Financial Services. The appellant had paid the service tax and interest before the show cause notice. The tribunal decided to set aside the penalties imposed under Sections 76 & 78, following the precedent set in the Punjab National Bank case.

4. The tribunal found that the issue in this case was identical to the Punjab National Bank case, where penalties were waived due to sufficient cause for failure to pay service tax. The tribunal upheld the service tax but accepted the prayer to set aside the penalties. Consequently, the penalties imposed on the appellant under Sections 76 & 78 were set aside, and the appeal was allowed in this regard.

5. In conclusion, the tribunal held that the penalties imposed on the appellant were not justified. The decision was based on the precedent set in the Punjab National Bank case, where penalties were waived under similar circumstances. The appellant's appeal was allowed, and the penalties imposed were set aside.

Note: The judgment was delivered by S/Shri M.V. Ravindran, Member (J) and P. Karthikeyan, Member (T) of the Appellate Tribunal CESTAT, Bangalore.