2016 (12) TMI 926 - AT - Service Tax

Imposition of penalty - Commercial Training or Coaching Services - service were brought under the service tax net w.e.f. 1/7/2003 - period of dispute is 1/7/2003 to 31/3/2004 - whether penalty is imposable when the amount of service tax and interest was paid much before the issuance of show cause notice and whether show cause notice can be issued when the details of payment of amount of service tax and interest was intimated to the Jurisdictional Superintendent in view of Section 73 (3) of the Finance Act, 1994 - Held that - Commercial Training or Coaching services were brought under the service tax net w.e.f. 1/7/2003 only. I find that the appellant got himself registered and started making statutory compliances by depositing the taxes and filing the ST-3 Returns. The only issue in dispute was regarding the amount of fees collected/received for the period prior to 1st July, 2003 for which services were to be provided at a later date. The said advance fees were collected prior to 01/07/2003. It is seen that initially, there was a Board s circular to the effect that such collection of fees prior to 01/07/2003, though for the services to be rendered after the said date would not get included in the value of the services. Subsequently, the Board issued another circular dated 05/11/2003, clarifying that since services were provided after 01/07/2003, any amount collected towards such service before the said date would be leviable to service tax. It appears that the appellant did not make any attempt to evade payment of service tax. The said services were made leviable to tax w.e.f. 01/07/2003 and such collection of fees amount at the start of the year, when the services were not taxable, cannot effect upon any malafide on the part of the appellant - issues being purely interpretative in nature with no malafides, penalty is set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Imposition of penalty when service tax and interest were paid before the show cause notice.
2. Validity of show cause notice issuance after intimation of payment under Section 73 (3) of the Finance Act, 1994.
3. Interpretation of taxable services regarding fees collected prior to 1st July 2003.

Analysis:
1. The appellant, an educational institution, provided coaching services with books to students. The issue revolved around the collection of fees before 1st July 2003 for services to be rendered later. The appellant paid the tax and interest before a show cause notice was issued. The Tribunal found no attempt to evade tax and set aside penalties under Sections 76 and 78 of the Finance Act, 1994.

2. The appellant argued that under Section 73 (3) of the Finance Act, 1994, no notice should be served if tax and interest are paid before notice issuance. The Commissioner (Appeals) did not address the limitation point raised during the hearing. The Tribunal noted that confusion arose due to the taxability of fees collected before 1st July 2003. The appellant's compliance with tax regulations and timely payment negated any malafide intent, leading to the dismissal of penalties.

3. The dispute centered on the interpretation of taxable services for fees collected before 1st July 2003. Initially, a circular stated that such fees were not taxable if services were provided after that date. However, a subsequent circular clarified that such fees were taxable. The appellant's actions did not indicate an intent to evade tax, especially as the services became taxable only from 1st July 2003. The Tribunal concluded that the issues were interpretative, with no malafides, and set aside the penalties imposed.

In conclusion, the Tribunal allowed the appeal, emphasizing the lack of malafide intent in the appellant's actions and the interpretative nature of the issues surrounding the taxable services and the payment of tax and interest before the issuance of a show cause notice.