2010 (6) TMI 136 - AT - Service Tax

Business Auxiliary services- the respondents is very small service provider and not taking service tax registration and non payment of service tax took place during initial period when the service tax was introduced on Business auxiliary services with effect from 1.7.2003 and as soon as the respondents were informed by the department that their activity was covered by the definition of Business Auxiliary services , they immediately discharged the tax liability alongwith interest. Held that- the penalty under Section 77 for non filing ST-3 returns and penalty under Section 78 equal to 25% of the penalty has already been upheld by the Commissioner (Appeals). In these circumstances, There is no infirmity in the order of the Commissioner (Appeals) waiving penalty under Section 76 by invoking Section 80 of the Finance Act,1994. The Revenue s appeal is therefore dismissed.

Summary

Issues: Taxability of services provided, non-payment of service tax, imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994, waiver of penalty under Section 76, invocation of Section 80 of the Act.

The judgment pertains to an appeal filed by the Department against Direct Marketing Agents of a bank for non-payment of service tax on services provided, which were deemed taxable from 1.7.2003. The respondents did not obtain service tax registration or pay the tax until detected by the department in July 2007. Upon detection, they registered, paid the outstanding tax with interest, and a show cause notice was issued in 2008, leading to penalties under Sections 76, 77, and 78 of the Finance Act, 1994. The Assistant Commissioner confirmed the tax demand, interest, and penalties. The Commissioner (Appeals) upheld penalties under Sections 77 and 78 but waived the penalty under Section 76, prompting the Department's appeal.

The main contention was whether the waiver of penalty under Section 76 by invoking Section 80 was justified. The Department argued that the respondents failed to pay tax by the due date, did not register, and did not file returns, with no reasonable grounds for non-compliance. The respondents claimed ignorance of tax liability, immediate payment upon notification, and absence of malicious intent, justifying the penalty waiver.

The Tribunal noted the respondents' small scale, prompt tax payment upon notification, and the fact that penalties under Sections 77 and 78 were already upheld. Considering these factors, the Tribunal found no fault in the Commissioner (Appeals)'s decision to waive the penalty under Section 76 using Section 80. Consequently, the Revenue's appeal was dismissed by the Tribunal.