2016 (3) TMI 951 - AT - Service Tax

Imposition of penalty - Section 76, 77 and 78 of the Finance Act, 1994 - Management Consultancy Service - Appellant rendered the services of advice and consultancy for various individuals and independent organizations with regard to the entire operation of the hotel in order to bring those hotels to the level of Taj - Entire Service tax along with interest paid before issuance of show-cause notice - Held that - appellant could have entertained bonafide believe that the advice, consultancy as given by them may not be covered under Management Consultancy Services and they are rendering the business of the various hotels in the same manner from 1988, therefore, no Service Tax liability arises. So, the appellant has made out a justifiable case for setting aside the penalties imposed. Therefore, the Service Tax liability on Management Consultancy Services was in nascent stage when the Audit Party brought to the knowledge of appellant that Service Tax liability arises, which was discharged immediately. So, by invoking the provision of Section 80 ibid, penalties imposed under Section 76, 77 and 78 are set aside. - Decided in favour of appellant

Summary

Issues:
Service Tax liability on Management Consultancy Services, imposition of penalties under Section 75(A), 76, and 78 of the Finance Act, 1994, applicability of Section 73(i)(a) in relation to discharge of Service Tax liability, invocation of Section 80 of the Finance Act, 1994 for setting aside penalties.

Analysis:
The appeal before the Appellate Tribunal CESTAT MUMBAI concerned the Service Tax liability on 'Management Consultancy Services' provided by the appellant from 16.10.1998 to 31.03.2001. The Revenue alleged that the appellant offered advice and consultancy to enhance the operations of hotels, akin to bringing them to the level of 'Taj'. The Commissioner of Central Excise, Thane-I confirmed the demand of Service Tax, interest, and penalties under Section 75(A), 76, and 78 of the Finance Act, 1994.

The appellant contended that they were unclear about the tax liability as they had been providing similar services since 1988. The appellant argued that they promptly registered and paid the Service Tax liability upon being advised by the Audit Department. They emphasized that the Service Tax liability was discharged before the show-cause notice was issued, citing a decision of the Hon'ble High Court of Allahabad. The Departmental Representative supported the penalties imposed by the lower authorities.

Upon reviewing the submissions, the Tribunal noted that the appellant did not contest the Service Tax liability and interest. It was revealed that the entire Service Tax liability, along with interest, was settled before the show-cause notice was issued. The Tribunal acknowledged that the appellant may have genuinely believed that their services did not fall under 'Management Consultancy Services' and that they promptly paid the tax upon being made aware of the liability. Consequently, the Tribunal set aside the penalties imposed under Section 76, 77, and 78 of the Finance Act, 1994, invoking the provisions of Section 80.

In conclusion, the Tribunal disposed of the appeal by ruling in favor of the appellant, setting aside the penalties imposed by the adjudicating authority.