2017 (8) TMI 708 - AT - Service Tax

Penalty u/s 76 and 78 - Business Auxiliary Services - commission received from the banks/non-banking financial institutions - payment of tax with interest before issuance of SCN - Section 73 (3) of the Act - extended period of limitation - Held that - the appellant has paid service tax along with interest on pointing out by the department, during the course of investigation, therefore, the SCN was not required to be issued in terms of section 73 (3) of the Act - Further, as there was contrary decision of this Tribunal on the issues, no penalty can be imposed - also, when there was divergent view on the issue, the extended period of limitation cannot be invoked - penlaties set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against penalty under Section 76 & 78 of the Finance Act, 1994 seeking waiver.

Analysis:
The appellant, an auto dealer providing Business Auxiliary Service to banks and financial institutions, received commission leading to a dispute with the Revenue over service tax payment for the period July 2003 to December 2004. The appellant paid the tax and interest before a show cause notice was issued in July 2007, which sought to appropriate the amount and impose penalties under Sections 76 & 78. The appellant contested the penalties, arguing that no show cause notice was required as per Section 73(3) since they had already paid the tax. The appellant also cited conflicting Tribunal decisions on whether the commission received falls under Business Auxiliary Service. The appellant sought penalty waiver under Section 80, referencing precedents like Nair Coal Services Ltd., Arpanna Automotive Pvt. Ltd., and Continental Foundation JT. Venture.

The Revenue contended that since the appellant did not pay 25% of the penalty with the tax and interest, Section 73(1)(a) applied, making them liable for penalties. They referred to the case of K. Madhav Kamath Brother & Co. to support their position. The Tribunal considered both arguments, noting that the appellant did not dispute the tax and interest but only sought penalty waiver based on the limitation period's invocability under Section 73(3). The Tribunal found the case law cited by the Revenue irrelevant to the current case and emphasized the appellant's early tax payment during the investigation, as seen in the Nair Coal Services Ltd. case.

The Tribunal also highlighted the conflicting Tribunal decisions, such as the one in Arpanna Automotive Pvt. Ltd., where it was held that no penalty could be imposed. Additionally, the Tribunal referenced the Continental Foundation JT. Venture case from the Supreme Court, which stated that in the presence of divergent views, the extended limitation period cannot be invoked. Consequently, the Tribunal set aside the penalties imposed on the appellant, allowing the appeal and ruling in favor of the appellant.

In conclusion, the Tribunal's decision was based on the appellant's early tax payment, the lack of necessity for a show cause notice under Section 73(3), conflicting Tribunal decisions supporting penalty waiver, and the Supreme Court's stance on divergent views affecting the limitation period. The penalties under Sections 76 & 78 were ultimately revoked, granting relief to the appellant.