2013 (4) TMI 71 - AT - Service Tax

Penalty - ignorance of law - misguidance by the Consultant - Business Auxiliary Services - demand confirmed invoking the extended period of limitation - Held that - On being asked about non filing of returns in his statement recorded under Section 14 it can be seen that he was misguided by the Consultant as to that the ICICI Bank is liable to pay the tax. After coming to know about the tax liability, he has paid the entire liability of service tax along with interest. This case is an appropriate case for condoning the lapse of not filing the return and not paying the service tax, but both the lower authorities have imposed penalties on the appellant for violation of rules. Lower authorities should have invoked the provisions of Section 80 of the Finance Act, 1994 and should not have imposed any penalties on the appellant. as decided in Ram Travels 2012 (4) TMI 252 - CESTAT, AHMEDABAD ignorance of law is enough to set-aside penalty under Section 76, 77 and 78 of the Finance Act, 1994. In favour of assessee.

Summary

Issues:
Appeal against Order in Appeal regarding Service Tax liability, interest, and penalties under Sections 76, 77, and 78 of the Finance Act, 1994.

Detailed Analysis:

1. Service Tax Liability and Penalties:
The appeal was against an Order in Appeal related to the non-payment of Service Tax by the appellant, who provided services as Direct Sales Agents on a commission basis. The appellant admitted to not discharging their service tax liability and not filing returns due to being misguided by their consultant regarding the tax obligations. The Assistant Commissioner issued a show-cause notice proposing the demand of unpaid Service Tax, interest, and penalties under various sections of the Finance Act, 1994. The Lower Authority confirmed the demand and imposed penalties. The First Appellate Authority upheld the penalties imposed by the Lower Authority.

2. Appellate Tribunal's Decision:
The appellant, despite not disputing the service tax liability, had paid the tax and interest upon being informed by the authorities. The Tribunal noted that the appellant was misled by their consultant regarding the tax liability, leading to non-compliance. Referring to a previous case precedent, the Tribunal held that ignorance of the law is a valid reason to set aside penalties under Sections 76, 77, and 78 of the Finance Act, 1994. Therefore, the Tribunal invoked Section 80 of the Finance Act, 1994, and set aside the penalties imposed by the lower authorities, emphasizing that the appellant had shown reasonable cause for non-imposition of penalties under Sections 76 and 77. The impugned order was set aside concerning the penalties under Sections 76 and 77, and the appeal was disposed of accordingly.

3. Conclusion:
The Appellate Tribunal, in its judgment, focused on the appellant's genuine misunderstanding of their tax obligations due to the consultant's misinformation. By invoking Section 80 of the Finance Act, 1994, the Tribunal absolved the appellant of the penalties imposed by the lower authorities, citing ignorance of the law as a valid reason. This case serves as a precedent for condoning penalties in situations where there is a genuine lack of awareness regarding tax liabilities, emphasizing the importance of considering reasonable causes for non-compliance before imposing penalties.