2017 (7) TMI 350 - AT - Service Tax

Penalty u/s 76 and 78 - Rent a Cab Scheme Operator Service - case of appellant is that Since, the service tax was levied for the first time w.e.f. 01.06.2007, there was confusion on the applicability of service tax for supply of buses to Ahmedabad Municipal Transport Corporation (AMTC) - Held that - undisputedly the appellant had been providing Rent a Cab Service to Ahmedabad Municipal Corporation (AMC) under an agreement dated 25.09.2006 and the levy was brought into w.e.f 01.06.2007. In the initial period, there was confusion about the applicability of levy to owners who supply of buses to various State transport corporations - Under the circumstance of uncertainty in law, the appellant could not pay the service tax for about six to eight months ie.e for the period from 01.06.2007 to 01.01.2008, which was paid by them on 31.03.2008 alongwith interest - it is a fit case for invoking under Section 80 of the Finance Act, 1994 - penalty set aside - appeal allowed - decided in favor of appellant.

Summary

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

Analysis:
The appeal was filed against an Order-in-Appeal passed by Commissioner (Appeal-IV) of Service Tax-Ahmedabad. The appellant provided the service of supplying buses to Ahmedabad Municipal Transport Corporation (AMTC) under an agreement dated 25.09.2006. Service Tax was levied on "Rent a Cab Scheme Operator Service" from 01.06.2007, requiring the appellant to obtain registration and discharge service tax. The appellant paid the service tax for the period from 01.06.2007 to 31.03.2008 along with interest. A show cause notice was issued for appropriation of the amount and imposition of penalty under Section 78 of the Finance Act, 1994. The demand was confirmed with interest and penalties under various provisions. The appellant challenged the imposition of penalties under Section 76 and 78, citing confusion on the applicability of service tax initially and a mutual understanding with AMTC to split the tax payment. The appellant referred to a Tribunal judgment upheld by the Supreme Court to support their contention that there was a reasonable cause for the delay in paying the service tax.

The Tribunal noted the confusion regarding the levy's applicability to bus owners supplying buses to transport corporations during the initial period of the levy. The appellant had delayed paying the service tax for about six to eight months due to this uncertainty in the law, which was eventually paid on 31.03.2008 along with interest. Citing a precedent case, the Tribunal observed that penalties against bus owners supplying buses to transport authorities were dropped due to reasonable cause for not paying the service tax during the relevant period. Therefore, invoking Section 80 of the Finance Act, 1994, the Tribunal set aside the penalties imposed under Section 76 and 78 of the Finance Act, allowing the appeal to that extent. The impugned order was set aside, and the appeal was disposed of accordingly.

This judgment highlights the Tribunal's consideration of the confusion surrounding the applicability of service tax to bus owners supplying buses to transport corporations during the initial period of the levy. The Tribunal invoked Section 80 of the Finance Act, 1994, to set aside the penalties imposed under Section 76 and 78, emphasizing the reasonable cause for the delay in paying the service tax and aligning with a precedent case where penalties were dropped for similar circumstances.