2010 (7) TMI 200 - AT - Service Tax

Penalty - While sanctioning the loans, the respondent is collecting commission for providing such services which fail, under the category of service provided as Banking and Financial services with effect from 10-9-2004. As soon as it came to the knowledge of the respondent, they immediately obtained the registration and paid the Service tax along with the interest but the adjudicating authority imposed a penalty under Sections 76, 77 and 78 of the Finance Act on the respondent. Held that penalty set aside in impugned order on the ground that service tax paid before issue of show cause notice.

Summary

Issues:
Appeal against dropping of penalty under Sections 76, 77, and 78 of the Finance Act by the Commissioner (Appeals) under Section 80 of the Finance Act, 1994.

Analysis:
The case involved an appeal by the Revenue against the dropping of penalties imposed on the respondent for not paying Service tax under Sections 76, 77, and 78 of the Finance Act. The respondent, a Cooperative Society, collected money as deposits, lent loans, and provided banking and financial services without registering or paying the Service tax. Upon realizing the non-compliance, the respondent obtained registration and paid the Service tax along with interest. The adjudicating authority imposed penalties, which were later dropped by the Commissioner (Appeals) under Section 80 of the Finance Act.

The Revenue contended that the penalties should be confirmed due to the respondent's failure to pay Service tax despite engaging in banking and financial services. The Revenue relied on a precedent to support its argument. However, the Commissioner (Appeals) considered various aspects, including the timeline of events and the nature of procedural delays faced by new assessees in complying with the Service tax law. The Commissioner (Appeals) highlighted the leniency shown in previous cases and emphasized the importance of voluntary compliance schemes.

In the detailed analysis, the Commissioner (Appeals) referenced specific cases where penalties were not justified when the tax liability was discharged before the issue of show-cause notices. The Commissioner (Appeals) also mentioned cases where penalties were set aside due to the absence of mala fide intentions on the part of the appellants. Ultimately, the Commissioner (Appeals) applied Section 80 of the Finance Act to grant relief to the respondent and dropped the penalties. The Tribunal upheld the decision, noting that the Commissioner (Appeals) had considered the issue thoroughly and exercised discretion under Section 80, providing no reason for interference.

In conclusion, the Tribunal rejected the Revenue's appeal, affirming the dropping of penalties by the Commissioner (Appeals) under Section 80 of the Finance Act. The judgment emphasized the importance of considering circumstances such as procedural delays and voluntary compliance in determining penalty imposition for non-compliance with tax laws.