2017 (12) TMI 1443 - AT - Service Tax

Penalty - the appellant did not pay the service tax and it was only paid when the intelligence visited the premises of the appellant - Held that - the appellant paid the service tax along with interest during investigation and before the issue of SCN. The appellant entertained a bona fide belief that their activities are not liable to service tax during the period in dispute and it is only on 06/11/2006, the Board clarified the issue - there cannot be a suppression with intent to evade tax when the assessee entertained a bona fide belief on the basis of certain decisions in favor of the assessee - penalty set aside - appeal allowed - decided in favor of appellant.

Issues:
1. Liability for service tax on commission received by promoting financial institutions.
2. Imposition of penalties under Sections 76, 77, and 78 of Finance Act, 1994.
3. Bona fide belief of the appellant regarding tax liability.
4. Payment of tax and interest before the issue of show-cause notice.
5. Interpretation of law and relevant decisions favoring the appellant.

Analysis:

1. The case involved the liability of the appellant for service tax on the commission received for promoting financial institutions. The appellant had not registered with the Department as a service provider, leading to initiation of action by the DGCEI and issuance of a demand notice. The demand was confirmed under Section 73(2) of Finance Act, 1994, with penalties imposed under Sections 76, 77, and 78. The Commissioner(Appeals) upheld the Order-in-original but dropped the penalty imposed under Section 76.

2. The main issue revolved around the imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994. The appellant contested the penalties, arguing that there was no suppression on their part to evade tax payment. The appellant cited relevant decisions, including the case of Roshan Motors Ltd., to support their argument that there was no suppression or misstatement, leading to the dropping of penalties in similar cases.

3. The appellant maintained that they had a bona fide belief that their activities were not taxable under the service tax regime during the period in dispute. They argued that decisions in favor of the assessee during that period supported their belief. The appellant emphasized that they paid the entire tax and interest during the investigation stage before the issuance of a show-cause notice.

4. The appellant's argument was supported by the fact that they paid the service tax along with interest before the show-cause notice was issued. The appellant's belief regarding the tax liability was considered bona fide, especially in light of relevant decisions and the clarification provided by the Board on 06/11/2006. The Tribunal found that there was no intent to evade tax on the part of the appellant.

5. The Tribunal, after considering the submissions and perusing the records, concluded that the impugned order imposing penalties was not sustainable in law. Citing the decision in the case of Roshan Motors Ltd., the Tribunal held that there was no suppression with intent to evade tax when the appellant entertained a bona fide belief based on relevant decisions. Consequently, the appeal was allowed, and the penalty was dropped.

This detailed analysis of the judgment highlights the key issues, arguments presented by both parties, relevant legal principles, and the Tribunal's decision in favor of the appellant.

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