2016 (9) TMI 238 - AT - Service Tax

Levy of penalty - delay in payment of service tax - Business auxiliary services supervision of the loading work of coal into wagon as per contract with various Electricity Boards waiver of penalty section 80 of the Finance Act, 1994 Held that - there is no delay in discharging service tax liability on being pointed out and justifiable reason as to non-receipt of payments from the State Electricity Board is given. The appellant carried a bonafide belief that these services would not be covered under business auxiliary service , thus invocation of section 80 justified - lower authorities should not have issued the show cause notice to the appellant for the demand of the service tax and appropriation thereof and for imposition of penalties. Provisions of Section 73(3) of the Finance Act, 1994 applies demand of tax and interest justified imposition of penalties set aside appeal allowed decided partly in favor of appellant.

Summary

Issues Involved:
Service tax liability for supervising loading work of coal under 'business auxiliary service' category from April 2007 to October 2007, penalties imposed under Sections 76, 77, and 78 of the Finance Act, 1994, applicability of Section 73(3) and Section 80 of the Finance Act, 1994.

Service Tax Liability and Penalties Imposed:
The case involved a dispute regarding service tax liability under the 'business auxiliary service' category for supervising coal loading work. The appellant had paid the tax liability along with interest in December 2007 and January 2008 after being pointed out by the audit department. The adjudicating authority confirmed the tax liability, appropriated the amounts paid, and imposed penalties under Sections 76, 77, and 78 of the Finance Act, 1994. The appellant argued that the issue of taxability was under litigation and that they had a bonafide belief the services were not covered under 'business auxiliary service.' The appellant also highlighted delays due to non-receipt of payments from State Electricity Boards. The Authorized Representative supported the penalties imposed by the adjudicating authority.

Applicability of Section 73(3) and Section 80 of the Finance Act, 1994:
The appellate tribunal noted that the appellant had discharged the tax liability promptly upon being pointed out by the audit department. It was observed that the delay in payment was due to non-receipt of payments from clients, and the appellant had a bonafide belief regarding the taxability of the services. The tribunal held that the show cause notice should not have been issued as Section 73(3) of the Finance Act, 1994 applied in this case. Additionally, the tribunal acknowledged the applicability of Section 80 of the Finance Act, 1994, where there was no delay in discharging the tax liability and a justifiable reason for the delay existed. Consequently, the tribunal set aside the penalties imposed on the appellant based on these provisions.

In conclusion, the appellate tribunal upheld the service tax liability and interest but set aside the penalties imposed by the adjudicating authority. The tribunal invoked the provisions of Section 80 of the Finance Act, 1994, considering the circumstances of the case, where the appellant promptly paid the tax liability upon notification and cited valid reasons for the delay.