2016 (12) TMI 860 - HC - Service Tax

Imposition of penalty - Assessee was dealing in the sale of recharge coupons/vouchers of the Bharat Sanchar Nigam Limited and received certain amount from the Bharat Sanchar Nigam Limited towards commission - failure to discharge tax - pament of tax after issuance of SCN - invocation of section 80 and penalty set aside - whether setting aside of penalty justified? Held that - Admittedly, the relevant period, during which the respondent Assessee did not pay the service tax, is 2003 to 2008. A Clear finding of fact has been recorded by the Tribunal that the sale of recharge coupons/vouchers purchased from the telephone service provider was a seriously contested issue before the Higher Judicial Forum at the relevant time and hence, there was reason to believe that the respondent Assessee bona fide believed that the same was not payable. Also, we do not find from the material on record that the registration of the respondent Assessee to service tax in the year 2004 is referrable only to the sale of recharge vouchers/coupons and not to anything else - section 80 rightly invoked. Penalty rightly set aside - appeal dismissed - decided in favor of respondent-assessee.

Summary

Issues:
Challenge to discharge of penalty liability in a Central Excise Appeal.

Analysis:
The appellant Department contested the discharge of the respondent Assessee's liability to pay the penalty in a Central Excise Appeal. The respondent Assessee was involved in the sale of recharge coupons/vouchers of a specific company and received commissions. A show cause notice was issued for the relevant years 2003 to 2008, questioning the liability to pay service tax, interest, and penalty. The Appellate Authority initially ruled that the sale of recharge vouchers was not subject to service tax. Subsequently, the Tribunal partially allowed the appellant Department's appeal, holding the respondent Assessee liable for service tax but exempting them from paying the penalty under Section 80 of the Finance Act, 1994. The appellant Department challenged this decision specifically regarding the penalty imposition.

Upon review, the High Court found no grounds to interfere with the Tribunal's decision. The respondent Assessee had paid the entire service tax liability after receiving the show cause notice, which was acknowledged by the Adjudicating Authority. The Tribunal noted that the issue of service tax liability on the sale of recharge vouchers was contentious and pending before a Higher Judicial Forum during the relevant period. The High Court rejected the appellant Department's argument that the respondent Assessee, having registered for service tax in 2004, was aware of the liability, emphasizing the ongoing dispute during the relevant period. The Court differentiated the present case from previous Supreme Court judgments cited by the appellant Department, highlighting the specific circumstances and timeline of the dispute. The Tribunal's decision to absolve the respondent Assessee of the penalty liability under Section 80 of the Finance Act, 1994 was deemed lawful, considering the genuine belief held by the respondent Assessee regarding the non-liability for service tax on the recharge vouchers.

As no substantial legal question meriting determination was identified in the Central Excise Appeal, the High Court dismissed the appeal without costs.