2012 (4) TMI 274 - AT - Service Tax

Commercial training or coaching - Appellant taken service tax registration in the year 2003, they did not collect service tax from the students and remit the same to the Government till 2006 - SCN issued demand for Service Tax, confirmed along with interest and a penalty u/s 76 ,77 and 78 of the Act Held that - some leniency in the matter of penalty may be warranted in this case considering that tax and interest were paid before adjudication order and the fact the appellant are a small service provider operating in a remote locality - simultaneous penalties under Section 76 and Section 78 cannot be imposed as per line with the case of K.P. Pouches (P.) Ltd. v. Union of India - 2008 - TMI - 30328 - HIGH COURT OF DELHI appellant given an opportunity to pay 25% of the tax demanded as penalty within 30 days of receipt of this order. If such payment is not made within the prescribed time limit, amount equal to the full tax amount confirmed will be payable - partly allowed.

Summary

Issues:
1. Liability to pay service tax on commercial training or coaching services.
2. Imposition of penalties under Sections 76 and 78 of the Finance Act, 1994.
3. Justification for imposing penalties under both sections.
4. Waiver of penalties invoking Section 80 of the Finance Act, 1994.
5. Appellant's failure to appear before the Commissioner (Appeals).
6. Legal validity of imposing penalties under both Sections 76 and 78.
7. Concession to pay 25% of tax amount as penalty within 30 days.

Issue 1: Liability to pay service tax on commercial training or coaching services:
The Appellants were providing commercial training or coaching services, which became taxable under the Finance Act, 1994 from 1.7.2003. Despite obtaining service tax registration in 2003, they failed to collect service tax from students until 2006. Consequently, a Show-Cause Notice was issued in 2006 demanding service tax for the financial years 2003-04, 2004-05, and 2005-06, along with interest and penalties.

Issue 2: Imposition of penalties under Sections 76 and 78 of the Finance Act, 1994:
Penalties were imposed under Sections 76 and 78 of the Finance Act, 1994, along with interest. The Appellants argued for the waiver of these penalties invoking Section 80 of the Act, citing their lack of awareness about service tax laws and procedures due to operating in a remote area where other coaching centers were not paying service tax.

Issue 3: Justification for imposing penalties under both sections:
The Counsel for the Appellants contended that there was no justification for imposing penalties under both Sections 76 and 78 of the Finance Act, 1994. They referred to decisions of the Punjab & Haryana High Court to support their argument.

Issue 4: Waiver of penalties invoking Section 80 of the Finance Act, 1994:
The Appellants sought leniency in penalty imposition, emphasizing that they had paid the duty liability along with interest before adjudication. They argued for the application of Section 80 of the Finance Act, 1994, for the waiver of penalties due to their circumstances.

Issue 5: Appellant's failure to appear before the Commissioner (Appeals):
The Appellants failed to appear before the Commissioner (Appeals) on multiple occasions, leading to the confirmation of penalties. They believed that their case was adequately represented through the records, which was not considered sufficient by the authorities.

Issue 6: Legal validity of imposing penalties under both Sections 76 and 78:
The Revenue argued that it was legally permissible to impose penalties under both Sections 76 and 78, citing relevant case laws to support their position.

Issue 7: Concession to pay 25% of tax amount as penalty within 30 days:
The Tribunal considered the conflicting decisions of High Courts regarding simultaneous penalties under Sections 76 and 78. Following the decision of the Punjab & Haryana High Court, the Tribunal waived the penalty under Section 76 and provided the Appellants with an option to pay 25% of the tax demanded as a penalty within 30 days from the receipt of the order.

In conclusion, the appeal was partially allowed, granting relief from the penalty under Section 76 and offering the Appellants the opportunity to pay 25% of the tax demanded as a penalty within the specified time frame.