2016 (11) TMI 1229 - AT - Service Tax

Levy of penalty u/s 76 and 78 of the Finance Act, 1994 - taxability of Sale of Space or Time for Advertisement - Service Tax was introduced on the said category with effect from 01.5.2006 - doubt as regards taxability of the service - section 80 - whether imposition of the appellant u/s 76 and 78 of the FA, 1994 needs to be upheld or the Appellant made out a case for invoking of Section 80 of the FA, 1994? - Held that - the appellant sought opinion from the reputed Chartered Accountant ie., M/s Talti & Talati with regard to the liability of the Service Tax on Sale of Space or Time for Advertisement levied for the first time with effect from 01.5.2006. On receiving a categorical opinion of non-applicability of Service Tax, they did not discharge the Service Tax. However, subsequently, on further inquiry from other sources/consultants they realized their mistake and discharged the entire amount of Service Tax alongwith interest on 05.7.2007 pertaining to the period of 01.5.2006 to 30.6.2007. Their Claim is that this argument even though advanced before the authorities below, but not considered. I find that undisputedly, the appellant is a public sector undertaking and also the amount of Service Tax due for the period of 01.5.2006 to 30.6.2007 has been paid by them after realization of the fact that the service rendered by them become leviable to service tax w.e.f 01.05.2005. Initial non payment of tax was due to a bonafided mistake and the mistake was attributed to the opinion rendered by a reputed Chartered Accountant firm M/s Talati & Talati. Thus, in my opinion, the reasons cited by the appellant for their initial failure to discharge Service Tax during the said period seems to be reasonable warranting invocation of Section 80 of the FA, 1994 - penalty set aside - appeal allowed - decided in favor of appellant-assessee.

Summary

Issues:
Imposition of penalty under Section 76 and 78 of the Finance Act, 1994, and the applicability of Section 80 of the Finance Act, 1994.

Analysis:
The case involved an appeal against an order passed by the Commissioner (Appeals) concerning the imposition of penalties under Section 76 and 78 of the Finance Act, 1994. The appellant, a public sector undertaking, provided taxable services under the category of "Sale of Space or Time for Advertisement." Initially, based on advice from their empanelled Tax Consultant, they did not pay Service Tax as they were informed it was not applicable to public sector undertakings. However, upon realizing their mistake, they paid the entire Service Tax amount with interest and registered with the Central Excise Department. A show cause cum demand notice was issued, leading to the imposition of penalties under Sections 76 and 78 of the Finance Act, 1994. The appellant contended that there was no intention to evade tax, citing advice from reputable consultants and timely payment of the tax liability after discovering the error. The appellant argued for the invocation of Section 80 of the Finance Act, 1994, due to reasonable cause for the initial failure to discharge the Service Tax liability. The Revenue, represented by the Authorized Representative, supported the findings of the Commissioner (Appeals).

The key issue before the Tribunal was whether the penalties imposed under Sections 76 and 78 of the Finance Act, 1994, should be upheld or if the appellant's case warranted the application of Section 80 of the Act. The appellant, being a public sector undertaking, relied on expert advice in tax matters and sought an opinion from a reputable Chartered Accountant firm regarding the applicability of Service Tax on their services. Upon receiving advice that Service Tax was not applicable, they did not pay the tax initially. However, upon further inquiry and realization of their mistake, they paid the entire tax amount with interest. The Tribunal acknowledged that the appellant's initial failure to pay tax was due to a bona fide mistake based on professional advice. Considering the circumstances and the timely payment of the tax liability upon discovery of the error, the Tribunal found the appellant's reasons to be reasonable and invoked Section 80 of the Finance Act, 1994.

In conclusion, the Tribunal set aside the order confirming the penalties imposed by the Adjudicating Authority and allowed the appeal to that extent. The Tribunal found in favor of the appellant, recognizing the reasonable cause for the initial failure to discharge the Service Tax liability and invoking Section 80 of the Finance Act, 1994.