2010 (2) TMI 325 - AT - Service Tax

Penalty- Appellant under contract with M/s. Singrauli Super Thermal Power Station gave on rent vehicles for the use of officers and staff. The appellant did not pay service on the services of rent-a-cab. The appellant voluntarily paid the duty. Another show cause notice was issued by the Department proposing demand of Rs. 19, 490/- for the period from January 2001 to 15th April 2005 excluding the period covered by show cause notice dated 29-4-04 . In pursuance of second show cause notice the original authority confirmed the demand of service tax of Rs. 20, 920/- though the demand was only Rs. 19, 490/- as per the show cause notice along with interest. He has imposed penalty of Rs. 500/- under Section 75A for late registration; imposed penalty of Rs. 5000/- under Section 77 for non-filing of the return. He has also imposed Rs. 20, 920/- as penalty under Section 76 of the Act and Rs. 41, 840/- under Section 78 of the said Act. Commissioner (Appeals) vide his impugned order upheld the order of the original authority. Held that- conduct of the appellant showing their bonafide. Moreover invocation of extended period in second SCN not justified. Section 8 of the Act invokable. Penalties set aside.

Summary

Issues:
- Service tax liability for rent-a-cab services provided to a thermal power station.
- Imposition of penalties under various sections of the Act.
- Timeliness of the show cause notice and subsequent proceedings.

Analysis:

Service Tax Liability:
The appellant provided vehicles on rent to a thermal power station and was found to have not paid service tax on the rent-a-cab services. Two show cause notices were issued, one in 2004 and another in 2006. The appellant voluntarily paid the duty for the period prior to April 2002 and after March 2003 upon receiving the first order. The second notice proposed a demand for the period from January 2001 to April 2005. The original authority confirmed the demand along with penalties. The Commissioner (Appeals) upheld this decision. The appellant argued that they were a small service provider, had paid the duty promptly upon receiving the first order, and believed they were not liable to pay the tax. The Tribunal acknowledged the appellant's prompt payment and held that the invocation of the extended period in the second notice was unjustified. Consequently, the demand for service tax and interest was upheld as uncontested.

Penalties Imposed:
Penalties were imposed on the appellant under various sections of the Act, including late registration, non-filing of returns, and other penalties. The Tribunal considered the appellant's conduct in promptly paying the service tax, even for the period not covered by the first notice, as evidence of their bona fide belief. The Tribunal found the penalties unwarranted in light of the appellant's actions and set them aside.

Timeliness of Proceedings:
The appellant raised concerns about the timeliness of the show cause notice issued in 2006, considering they had already paid the duty voluntarily after the first notice. The Tribunal agreed that the second notice, issued after a significant delay, was not justified. It held that the appellant's actions demonstrated good faith and that invoking the extended period in the second notice was inappropriate. The Tribunal disposed of the appeal by upholding the service tax demand while setting aside the penalties imposed on the appellant. The stay petition was also disposed of in favor of the appellant.