2010 (9) TMI 104 - AT - Service Tax

Limitation- The revenue imposed service tax and penalties on the assessee after expiry of limitation period with a charge that assessee suppressed the facts with intent to evade duty. Commissioner (Appeals)deleted the penalty u/s 78 as the intent to evade duty could not be proved. Tribunal held that when there was no intent to evade duty then demand could not be raised after limitation period.

Summary

Issues:
Confirmation of service tax under rent-a-cab scheme; Imposition of penalty under Section 76 of the Finance Act; Setting aside penalty under Section 78 by Commissioner (Appeals); Invocation of longer period for demand by Revenue; Barred demand by limitation; Liability for interest and penalty.

Confirmation of Service Tax:
The appellant, engaged in hiring cabs and providing services on a per km basis, contested the service tax demand of Rs.84,672 under the rent-a-cab scheme. The Commissioner (Appeals) upheld the confirmation of service tax and penalty under Section 76, but set aside the penalty under Section 78 due to lack of evidence supporting intent to evade tax.

Penalty Under Section 78:
The Revenue, represented by the DR, argued for upholding the tax confirmation and penalty under Section 76, as the penalty under Section 78 was set aside by the Commissioner (Appeals) based on leniency rather than evidence of fraud or intent to evade tax.

Invocation of Longer Period and Limitation:
The Tribunal noted that the Commissioner (Appeals) found no evidence of fraud, willful misstatement, or suppression of facts to evade tax, which are prerequisites for invoking the longer period. Since the Revenue did not challenge this finding, the demand raised in December 2004 for the period of 2000 was deemed barred by limitation, absolving the appellant from the payable demand.

Liability for Interest and Penalty:
The appellant had paid the entire tax amount and agreed not to claim it back. Following the Tribunal's decision, the appellant was relieved from paying interest and penalties under other sections of the Finance Act, 1994, based on the undertaking regarding the tax payment.

This judgment highlights the importance of evidence supporting tax evasion intent, the implications of setting aside penalties based on leniency, the significance of challenging findings to avoid limitation issues, and the impact of appellant's tax payment on liability for interest and penalties.