2016 (12) TMI 231 - AT - Service Tax

Levy of tax - fees paid under Club or Association Service - imposition of penalty u/s 76 and 77 of the act - Held that - It is not disputed that till introduction of negative list from 1.7.2012, there was no clarity on the nature and taxability of the service provided by the appellant. In fact for the earlier period, it was held that services availed were not in the nature of Club or Association Service but were only Technical Inspection and Certification Services . No doubt, OIA dt. 12.12.2011 upholding such a view of the original authority was not appealed by the department on monetary grounds as per litigation policy. Nonetheless, the fact remains that the matter was not free from doubt and disputed by the appellant on interpretation during the impugned period. It is also to be noted that appellants are a Public Sector Undertaking and that they have accepted their tax liability after 1.7.2012, after introduction of negative list and as of date, the tax liability after 1.7.2012 has been discharged by them with interest, albeit, belatedly. In the circumstances, I am of the considered opinion that the imposition of penalty under Section 76 of the Finance Act, 1994 is not called for and is hereby set aside. Levy of penalty for non filing of return - Their plea of bonafide belief of not requiring to apply for registration and non-filing of returns as no service tax was payable by them, merits consideration. For these reasons, I find that there is sufficient ground for setting aside penalties under Section 77 ibid also, which I hereby do. Tax liability and interest upheld - penalty set aside - appeal disposed off - decided partly in favor of appellant-assessee.

Summary

Issues:
The issue involves the imposition of penalties under Section 76 and 77 of the Finance Act, 1994 on the appellant for payments made towards membership fees and agreement with an association for receiving information, with the main contention being the tax liability and penalties imposed.

Analysis:
The appeals addressed the payments made by the appellant to an association for membership fees and information, leading to a dispute over the imposition of service tax under "Club or Association Service" and the subsequent penalties. The appellant acknowledged the tax liability but contested the penalties imposed under Sections 76 and 77 of the Finance Act, 1994. The appellant argued that a previous decision in their favor for a different period should prevent the imposition of penalties for the current period. The Revenue, on the other hand, justified the penalties based on the litigation policy and the introduction of reverse charge basis for service tax from July 1, 2012.

The advocate for the appellant highlighted that the tax liability was accepted for payments made after July 1, 2012, following the introduction of the negative list. The Tribunal considered the lack of clarity regarding the nature and taxability of the services provided by the appellant before July 1, 2012. It noted that the appellant, a Public Sector Undertaking, had paid the tax liability post-July 1, 2012, albeit belatedly. The Tribunal concluded that the penalties under Section 76 of the Finance Act, 1994 were not warranted and set them aside.

Regarding the penalties under Section 77 for non-registration and non-filing of returns, the Tribunal acknowledged the appellant's genuine belief that no service tax was payable due to the nature of the services provided. The Tribunal found merit in the appellant's argument and decided to set aside the penalties under Section 77 as well. Ultimately, the Tribunal allowed both appeals by overturning the penalties under Sections 76 and 77, while maintaining the demand for tax liability and interest thereon.

In conclusion, the Tribunal's decision focused on the appellant's acceptance of tax liability post-July 1, 2012, the lack of clarity on the taxability of services pre-July 1, 2012, and the genuine belief of the appellant regarding non-registration and non-filing of returns. The Tribunal emphasized the appellant's compliance post-July 1, 2012, and set aside the penalties under Sections 76 and 77, while upholding the tax liability and interest.