2014 (10) TMI 133 - AT - Service Tax

Levy of penalty u/s 78 - Business Auxiliary service - distributor / commission agent of M/s. Vodafone Essar Gujarat Ltd - service tax with interest paid before issuance of show cause notice - Held that - appellant started providing services in April 2007 and full payment was made in February 2008. Under these circumstances, the circular issued by the Board in 2007, wherein it was clarified that the conclusion of proceedings envisaged under sub-section (3) of Section 73 would be applicable where the Service Tax and interest are paid on ascertainment by Central Excise officers or otherwise with interest. This case is squarely covered under Section 73(3) of Finance Act, 1994 and therefore penal provision under Section 78 need not be initiated. Therefore, penalty under Section 78 is not sustainable and accordingly the same is set aside. Benefit of Notification No. 6/2005-S.T. - SSI exemption - revenue argue that SSI benefit cannot be extended when the assessee has not opted for the same - Held that - the appellant took registration for the first time in April 2007 and did not pay any tax and only in February 2008, after coming to note that the appellant was liable to pay tax, they paid the tax. They did not file return also - appellants have to be given the benefit of SSI exemption. - Decided in favour of assessee.

Summary

Issues:
1. Imposition of penalty under Section 78 of Finance Act, 1994.
2. Extension of benefit of exemption Notification No. 6/2005-S.T.

Analysis:

Issue 1: Imposition of penalty under Section 78 of Finance Act, 1994
The appellant, engaged as an authorized distributor, failed to pay Service Tax despite registration. The appellant argued that they were unaware of the tax liability and promptly paid the tax with interest upon notification by the department. The appellant cited Tribunal decisions supporting non-imposition of penalty in similar cases. The Revenue contended that non-payment indicated deliberate evasion. However, the appellant's immediate compliance upon notification, payment of tax, and filing of returns were noted. Citing a Board circular, it was concluded that the case fell under Section 73(3) of the Finance Act, 1994, and penalty under Section 78 was deemed unnecessary. The penalty under Section 78 was set aside.

Issue 2: Extension of benefit of exemption Notification No. 6/2005-S.T.
The Revenue appealed the extension of the exemption benefit. The appellant, citing Tribunal decisions, argued for eligibility based on their circumstances. A comparison was made to a previous case where the SSI benefit was not granted due to the timing of opting for exemption. However, it was noted that the appellant had registered in April 2007, paid tax in February 2008 upon realization of liability, and did not file returns earlier. The appellant's reliance on relevant decisions supported their claim for the exemption. The judgment upheld the decision granting the appellant eligibility for exemption under Notification No. 6/2005-S.T.

In conclusion, the appeal filed by the Revenue was rejected, affirming the decision on both issues. The judgment was pronounced on 5-10-2011 by Shri B.S.V. Murthy, Member (T) at the Appellate Tribunal CESTAT AHMEDABAD.