2009 (10) TMI 455 - AT - Service Tax

Penalty- Before the issuance of SCN- the appellant paid the tax before the issuance of Show Cause Notice. Held that- fit case for application of provisions of Section 80 of Finance Act, 1994 and set aside the penalties imposed. Accordingly, penalties imposed under various Sections of Finance Act, 1994 are set aside.

Summary

Issues:
Service tax liability for the period from 1-4-2000 to 1-8-2005; Imposition of interest and penalties under various Sections of Finance Act, 1994; Applicability of Section 80 of Finance Act, 1994; Owner's liability for tax evasion; Interpretation of intention to evade tax.

Analysis:
The judgment by the Appellate Tribunal CESTAT, Ahmedabad dealt with the service tax liability amounting to Rs. 1,72,025 for the period from 1-4-2000 to 1-8-2005. The appellant had paid this amount towards rent-a-cab service before the issuance of a show cause notice. Additionally, interest had been demanded, and penalties were imposed under different Sections of the Finance Act, 1994.

The appellant, represented by a consultant, argued that they owned only one cab, purchased on loan, and due to ignorance, failed to pay the tax initially. However, upon being made aware of the liability, the appellant promptly settled the full service tax amount. The consultant contended that the case merited the application of Section 80 of the Finance Act, 1994, seeking a waiver of penalties. On the contrary, the Departmental Representative (DR) asserted that penalties were justifiable, especially for those guilty of suppression, citing a decision of the Hon'ble High Court of Kerala.

After considering the arguments from both parties, the Tribunal noted that the appellant, being the owner of a single cab and not highly educated, had no intention to evade tax. Given these circumstances, the Tribunal found it appropriate to apply the provisions of Section 80 of the Finance Act, 1994. Consequently, the penalties imposed under various Sections of the Finance Act, 1994 were set aside, considering the individual nature of the appellant's situation and lack of deliberate tax evasion.

The judgment underscores the importance of assessing the taxpayer's intent and circumstances while determining tax liabilities and penalties. It highlights the application of Section 80 of the Finance Act, 1994 in cases where there is no deliberate evasion and where the taxpayer demonstrates prompt compliance upon notification of the tax liability.