2016 (4) TMI 936 - AT - Service Tax

Imposition of penalties - Cargo Handling Services - Rendering services of loading and unloading and transport of goods to M/s SAIL at different locations - Discharged the Service Tax liability along with interest - Held that - appellant could have been under bonafide impression that this contract is signed in the year 1999 and they were not liable to Service Tax at the time and hence they did not discharge the Service Tax liability, even after the inclusion the services under the Finance Act for discharge of Service Tax.It is noted that the appellant could have been under bonafide belief as he has been engaged in the rendering the services to public sector hence question of taxability may not arise. Therefore, appellant has made out a case for setting aside the penalty imposed on them under the provision of Section 80 of the Finance Act,1994. - Appeal disposed of

Summary

Issues Involved: Service Tax liability on "Cargo Handling Services" from 16.08.2002 to 31.03.2016; Setting aside penalties imposed by lower authorities.

Analysis:

Service Tax Liability Issue:
The appeal addressed the Service Tax liability of the appellant for "Cargo Handling Services" provided from 16.08.2002 to 31.03.2016 under a contract with M/s SAIL. The appellant had not initially discharged the Service Tax liability, which was later settled after an investigation. The Tribunal noted that the tax liability and interest had been paid by the appellant. The appellant's argument was based on a bonafide belief that they were not liable for Service Tax due to the contract being signed in 1999, before the inclusion of the services under the Finance Act. The Tribunal considered the appellant's engagement in providing services to the public sector, leading to a genuine belief that taxability might not apply. Consequently, the Tribunal found merit in setting aside the penalties under Section 80 of the Finance Act, 1994, due to the appellant's bonafide belief and the payment of the tax liability.

Penalties Imposition Issue:
The Departmental Representative contended that penalties should be upheld due to the appellant's knowledge of the taxability of the services provided to M/s SAIL at different locations. However, the Tribunal, after considering both sides' submissions and examining the records, found that the appellant had a reasonable belief that they were not liable for Service Tax, given the circumstances surrounding the contract and their engagement with the public sector. The Tribunal concluded that the appellant had made a case for setting aside the penalties imposed, as the tax liability and interest had been paid, and the appellant's belief was considered reasonable under the circumstances. Therefore, the penalties were set aside, and the appeal was disposed of by upholding the Service Tax liability and interest while cancelling the penalties.

This judgment highlights the importance of considering the bonafide belief of the taxpayer in tax liability cases and the relevance of the circumstances surrounding the services provided in determining taxability. It emphasizes the need for a thorough examination of the facts and the application of relevant provisions of the law to ensure a fair and just decision in tax matters.