2013 (11) TMI 1457 - AT - Service Tax

Waiver of penalty u/s 80 - Penalty under section 76 & 78 - Construction of residential complex services - Assessee neither got registered with the department under the Service Tax Act nor filed any returns to the department - Commissioner (Appeals) after invoking section 80 dropped the penalty as the appellant had contended the existence of bonafide belief that service tax would be applicable only when actual sale was effected - Held that - amendment was effective from 1.7.2010. Visit to the factory by the officers was on 16.8.2011. It was found that the Respondent had already started booking of flats w.e.f.August, 2010. Law was already on the statute book. Therefore everyone was expected to know the law. Question of existence of bonafide belief as provided under section 80 of the Finance Act, 1994 does not come to their rescue. If registration was taken on their own and service tax would have been deposited thereon even at the time of booking of flats, question of bonafide belief would have come into play. There is nothing on record to show that they have made any effort to know about liability of service tax or approached department for any clarification. It was only after visit of the departmental officers, appellants got themselves registered - penalty reduced to equal to fifty percent of service tax due as provided under the first proviso to section 78 - Decided partly in favour of Revenue.

Summary

Issues:
1. Imposition of penalty under section 76 & 78 of Finance Act, 1994 for evasion of service tax.
2. Appeal against Order-in-Original regarding penalty waiver.
3. Interpretation of bonafide belief in relation to service tax liability.
4. Application of section 80 of Finance Act, 1994 for penalty imposition.
5. Reduction of penalty amount based on circumstances.

Issue 1: Imposition of Penalty under Section 76 & 78:
The appeal was filed by the Revenue against an Order-in-Appeal that set aside the penalty imposed under section 76 & 78 of the Finance Act, 1994 for evasion of service tax. The case involved a company engaged in construction services found to be non-compliant with service tax regulations.

Issue 2: Appeal Against Penalty Waiver:
The Commissioner (Appeals) allowed the appeal for waiver of the imposed penalty, citing the appellant's ignorance of the changes in the Service Tax Law as a reason for opposing the penalty imposition. The appellant had applied for registration upon realizing their tax liability, indicating a lack of deliberate evasion.

Issue 3: Interpretation of Bonafide Belief:
The Commissioner (Appeals) considered the appellant's belief that service tax was not payable until the actual sale was effected. However, the Tribunal noted that the law had been in effect since July 2010, and the company had started booking flats in August 2010, indicating awareness of the law.

Issue 4: Application of Section 80 for Penalty Imposition:
The Tribunal disagreed with the Commissioner's finding that the appellant's conduct was bonafide, emphasizing that mere registration and payment after departmental visit did not absolve them of liability. The Tribunal found that the penalty was warranted despite the payment of service tax and interest.

Issue 5: Reduction of Penalty Amount:
While acknowledging the deposit of service tax and interest by the appellant, the Tribunal decided to impose a penalty equal to fifty percent of the service tax due, considering the circumstances and the maintenance of records by the appellant. This decision aimed to strike a balance between penalty imposition and the appellant's compliance efforts.

This judgment highlights the importance of compliance with service tax regulations, the significance of timely registration, and the consequences of non-compliance even in cases of ignorance. The Tribunal's decision to reduce the penalty amount showcases a balanced approach towards penalty imposition while upholding the principles of tax liability and bonafide belief in tax matters.