2014 (8) TMI 923 - AT - Service Tax

Business Auxiliary Service - Penalty u/s 76, 77 & 78 - visa consultancy service to students who want to study abroad - commission from local visa consultancy agents for referring students - Held that - Appellant has discharged the service tax liability and the interest thereof, on being pointed out about the tax liability. It is also noted that the statements of the concerned officials of the assessee also clearly indicate that they were unaware of the law as to the taxability of the service rendered to them by the local agents. We also find that the first appellate authority while setting aside the penalties imposed on the appellant under section 78 of Finance Act 1994 as recorded that the adjudicating authority has not recorded any findings on the imposition of penalty under section 78. This itself would reinforce the argument of the appellant that they were under bonafide belief that the service tax liability does not get attracted. We find strong force in the of contention raised by the Ld. Counsel that the appellant had never collected the amount of service tax liability from the service recipient though the bills were raised for the service rendered - appellant could have entertained a bonafide belief that the service rendered by him may not be taxable. We are of the view that the appellant had made out a reasonable cause for setting aside the penalties imposed on him under section 76 and 77 of the finance act 1994 - Decided in favour of assessee.

Summary

Issues:
Service tax liability for visa consultancy services, imposition of penalties under sections 76 and 77 of the Finance Act 1994.

Analysis:

The case involved an appeal against an order directing the recovery of service tax for providing visa consultancy services without being registered for service tax. The appellant earned income from students and local agents, which was deemed taxable under Business Auxiliary Service. The adjudicating authority ordered the recovery of service tax, confirmed demand under different categories, and imposed various penalties.

The appellant, while not disputing the service tax liability, contested the penalties on the grounds of a genuine belief that the services provided were not taxable, and they had not collected service tax from recipients. The first appellate authority set aside some penalties but upheld others, including penalties under sections 76 and 77 of the Finance Act 1994. The revenue did not appeal the setting aside of penalties under section 78.

Upon review, the Tribunal noted that the appellant had paid the service tax liability and interest upon being informed of the tax liability. The Tribunal observed that the appellant's officials were unaware of the tax law regarding the services provided. The absence of findings on penalty imposition under section 78 by the adjudicating authority supported the appellant's claim of a genuine belief in non-taxability. The Tribunal agreed that the appellant had not collected service tax from recipients despite raising bills.

Considering the circumstances, the Tribunal found that the appellant could have genuinely believed the services were not taxable. Consequently, invoking section 80 of the Finance Act 1994, the Tribunal set aside the penalties under sections 76 and 77. The Tribunal upheld the service tax liability and interest paid by the appellant, as they did not contest these amounts.

In conclusion, the appeal was disposed of by setting aside penalties under sections 76 and 77 while upholding the service tax liability and interest payments made by the appellant.