2010 (6) TMI 273 - AT - Service Tax

Charge of Service Tax - The appellants deposited the service tax to the department by adopting the rate of 10 per cent as was applicable during 2004-05. The lower authorities have, however, entertained a view that the rate of service tax required to be applied is 12 per cent as is in force during 2006-07. difference amount with interest paid by assessee. Now the assesese made the appeal for the waiver of penalty which was rejected by Commissioner (Appeals). Held that - in the light of the decision of Reliance Industries Ltd. v. CCE 2008 -TMI - 4007 - CESTAT, AHMEDABAD, matter was remanded to Commissioner (Appeals).

Summary

Issues:
Interpretation of service tax rate for a service rendered in one period but payment received in another period; Applicability of penalty under section 76 of the law.

Analysis:
1. The appellant, a registered service taxpayer under Construction services, rendered a service to a client in 2004-05 but received consideration in 2006-07. The appellant paid service tax at 10%, applicable in 2004-05, while authorities insisted on 12%, the rate for 2006-07. The appellant did not contest the differential tax of Rs. 19,520 and paid it with interest.

2. The appellant sought to waive the pre-deposit penalty condition, citing the Tribunal's decision in Reliance Industries Ltd. v. CCE, which held that the tax rate at the service rendering date applies, not the payment date. The appellant acknowledged the differential tax liability but contested the penalty imposition.

3. The law, as per Reliance Industries Ltd., dictates no penalty imposition. Even if applicable, section 76 limits the penalty to the confirmed service tax amount, not the higher Rs. 1,38,197 sought. The Tribunal concurred with the appellant's argument, noting the tax and interest were already paid, thus waiving the pre-deposit penalty.

4. The Tribunal found merit in the appellant's case, noting the tax and interest deposit and the excessive penalty sought. The Commissioner's dismissal based on non-compliance with pre-deposit was set aside. The matter was remanded for fresh consideration, aligning with the Reliance Industries Ltd. precedent, without enforcing any pre-deposit requirement.

5. The stay petition and appeal were disposed of accordingly, with the Tribunal ruling in favor of the appellant based on the interpretation of tax rates and penalty provisions under section 76, as guided by the legal precedent set by Reliance Industries Ltd.