2010 (6) TMI 174 - AT - Service Tax

Penalty- M/s. Pankaj Tyre Retreads are engaged in the business of tyre retreading, which is covered under the category of Maintenance or Repair service. The scope of the said category of service was extended w.e.f. 16-6-2005. The appellants contended that they are proprietary concern, and they were under bona fide belief that the service tax is liable only on the element of service provided and not on the element of material used or sold while providing service. Held that- positive suppression cannot be attributed on merely not approaching department for registration. Service tax with interest paid. Waiver of penalty u/s 80 grantable. Impugned order sustainable.

Summary

Issues:
1. Scope of service tax on Maintenance or Repair service.
2. Applicability of Notification No. 6/2005-S.T.
3. Penalty imposition under Sections 76, 77, and 78 of the Finance Act.
4. Invocation of Section 80 of the Act for penalty waiver.
5. Suppression of facts and registration requirement.

Analysis:
1. The judgment deals with the scope of service tax on Maintenance or Repair service provided by M/s. Pankaj Tyre Retreads, covered under the category of Maintenance or Repair service. The Central Excise officers conducted search operations at their premises and initiated proceedings for recovery of service tax. The appellant pleaded exemption under Notification No. 6/2005-S.T., dated 1-3-05. The Commissioner (Appeals) confirmed the tax liability of Rs. 51,292, and the Revenue filed an appeal against this order.

2. The Commissioner (Appeals) observed that the appellants were under a bona fide belief regarding the scope of Notification No. 6/2005-S.T., dated 1-3-05, and their liability for service tax. The Commissioner invoked Section 80 of the Act and set aside the penalty imposition under Sections 76, 77, and 78 of the Finance Act. The Revenue contested this decision, arguing that the appellants' failure to obtain registration until the search by Revenue constituted suppression of facts, justifying the penalties. However, the Tribunal found no merit in Revenue's argument, noting that the appellant's belief in exemption until a certain threshold was reasonable, given the extension of the service tax category from 16-6-05 onwards.

3. The Tribunal held that the appellant's failure to register did not amount to positive suppression, especially since they voluntarily paid the entire service tax with interest. Consequently, the benefit of Section 80 of the Finance Act was justified in this case. The Tribunal rejected Revenue's appeal, upholding the decision of the Commissioner (Appeals) to set aside the penalties. The judgment emphasizes the importance of bona fide belief, reasonable cause, and the specific timeline of service tax applicability in determining penalty waivers and liability in service tax cases.

4. In conclusion, the Tribunal's decision affirms the invocation of Section 80 of the Act for penalty waiver based on the appellant's genuine belief, the absence of positive suppression of facts, and the timely payment of service tax with interest. The judgment underscores the significance of understanding the legal provisions and timelines related to service tax liabilities to avoid penalties and ensure compliance with the law.