2010 (2) TMI 507 - AT - Service Tax

Penalty Delay in payment of service tax - assessee provided service to Bank for recovery of loans from the customers of the bank - levy of Business Auxiliary Service which covers such activities was introduced in July, 2003 for the first time - delay in payment occurred in the period immediately after imposition of the new levy Held that - waive the penalties imposed on the appellants

Summary

Issues:
1. Applicability of 'Business Auxiliary Service' levy introduced in July 2003.
2. Compliance with service tax law and payment of tax amount.
3. Invocation of provisions of section 80 of the Finance Act, 1994 for penalty waiver.
4. Confirmation of penalty under section 75A.

Analysis:

1. The appellants provided services to a bank for loan recovery, falling under the 'Business Auxiliary Service' levy introduced in July 2003. There was confusion regarding the applicability of this levy to the appellants during the period from July '03 to March '04, leading to non-compliance with the service tax law.

2. The appellants, after realizing the error, paid the tax and interest amounts before the adjudication order. Additionally, 25% of the penalty amount was paid later during the proceedings. The delay in payment was noted to have occurred immediately after the imposition of the new levy.

3. The learned advocate for the appellants requested the waiver of penalties under sections 76 and 77 of the Act by invoking section 80 of the Finance Act, 1994, citing a reasonable cause for the initial non-payment of tax. The Tribunal, after considering the circumstances, decided to partially waive the penalties imposed under sections 76 and 77, limiting the waiver to the amount already paid by the appellants. However, it was clarified that section 80 does not apply to penalties under section 75A, which was confirmed.

4. In the final decision, the Tribunal partially allowed the appeal by granting the benefit of section 80 for the initial period, leading to the waiver of penalties under sections 76 and 77 exceeding the amount already paid. The penalty under section 75A was upheld as section 80 does not extend to penalties imposed under this section.