2016 (11) TMI 518 - AT - Service Tax

Divestment programme - Appellant had taken over control of Hotel Centaur from Govt. of India - Mandap Keeper Services - Health and Fitness Services - Dry cleaning Services - Held that - Once it is accepted that the Appellant were rendering Mandap Keeper/ Banquet Servcies and the Bills were raised for the gross amount towards food and all services related with such activity, the assessee would be eligible for abatement of 40% from the value of the service for payment of service tax. Therefore the service tax liability of the Appellant in respect of Mandap Keeper services should be on the value after abatement of 40% in terms of Notification No. 21/97 - ST dt. 26.06.97 and subsequent analogus notifications. We accordingly hold that the Appellant is eligible for abatement of 40% from the value of services under aforesaid notifications. Imposition of penalty u/s 76,77 and 78 - Held that - the Appellant had taken over the hotel known as Hotel Centaur from Govt. of India under its divestment programme. However as the facts appear, due to non cooperation by employees and their strike, litigation in High Court, VRS to their employee and subsequent closure the service tax payment could not be made. We also find that details of services rendered by them were appearing in their Bills and accounts books. we find that the non payment of service tax on above services was due to financial constraints as well as various happenings as mentioned above. Moreover, the Appellant has not contested the service tax liability which is payable and major amount was already deposited. We therefore hold that the Appellant is eligible for waiver of penalties in terms of Section 80 of the Finance Act, 1994. Penalties u/s 75A - Held that - Appellant has not got the Health & Fitness and Dry-cleaning services incorporated in their registration. Therefore penalty under section 75A imposed, is sustained. Demand of service tax reduced - penalties u/s 76,77 and 78 set aside - appeal allowed - decided partly in favor of appellant.

Summary

Issues:
1. Non-payment of service tax under various categories.
2. Disputed demand of service tax.
3. Imposition of penalties under different sections of the Finance Act, 1994.
4. Eligibility for abatement and waiver of penalties.
5. Applicability of relevant notifications and judgments.

Issue 1: Non-payment of service tax under various categories
The appeal was filed against the order passed by the Commissioner of Central Excise, Thane - I, Commissionerate, Mumbai, alleging non-payment of service tax by the Appellant. The Appellants had taken over a hotel and were charged with not registering or paying service tax on Health and Fitness Services and Drycleaning Services. The show cause notice proposed a demand of ?54,27,614, out of which ?31 lakh pertained to service tax on Mandap Keeper Services. The Appellant contended that they faced financial constraints leading to non-payment of service tax in subsequent periods. They argued that they had paid ?31 lakhs as soon as pointed out by the department and the remaining amount later. The Appellant also claimed ignorance of the law regarding registration under certain categories.

Issue 2: Disputed demand of service tax
The adjudicating authority confirmed the demand and imposed penalties under various sections of the Finance Act, 1994. The Appellant challenged this order, claiming financial constraints, non-cooperation of employees, and ignorance of the law as reasons for non-payment of service tax. The Appellant argued for the benefit of abatement of 40% under the Mandap Keeper Services category, citing relevant notifications. The Tribunal found that the Appellant was eligible for abatement of 40% from the value of services under the notifications, reducing the service tax liability to ?34,38,279. The Tribunal also noted that there was no evidence of collecting service tax from customers over and above the bill amount.

Issue 3: Imposition of penalties under different sections
The Tribunal considered the imposition of penalties under Section 76, 77, and 78 of the Finance Act, 1994. It observed that the non-payment of service tax was due to financial constraints, employee issues, and other circumstances. The Tribunal found that the Appellant was eligible for waiver of penalties under Section 80 of the Act. The penalties under Section 76, 77, and 78 were set aside, except for the penalty under Section 75A, which was sustained due to the Appellant not incorporating Health & Fitness and Dry-cleaning services in their registration.

Issue 4: Eligibility for abatement and waiver of penalties
The Tribunal held that the Appellant was entitled to the abatement of 40% under the relevant notifications, reducing the service tax liability. It also waived penalties under Section 76, 77, and 78, except for the penalty under Section 75A. The Appellant's financial constraints and other challenges were considered in granting relief from penalties.

Issue 5: Applicability of relevant notifications and judgments
The Tribunal relied on relevant notifications and judgments to determine the Appellant's eligibility for abatement and waiver of penalties. The Appellant's compliance with tax liabilities, financial difficulties, and lack of malafide intent were crucial factors in the Tribunal's decision to reduce the service tax demand and set aside penalties.

This detailed analysis of the judgment addresses the issues involved, the arguments presented, and the Tribunal's findings, providing a comprehensive overview of the legal proceedings and outcomes.