2018 (2) TMI 78 - AT - Service Tax

Penalty - GTA services availed by the appellant for transportation of mined iron ores within and outside the mining area - Held that - in the present case, the adverse factors like suppression of facts, mis-statement or fraud or collusion are not present. Therefore, even though the extended period has been invoked in the proceedings, absence of these factors would mean that the appellant should not be penalised with an amount equal to the duty determined as envisaged under Section 78 of the Finance Act, 1994 - there does exist reasonable and justifiable cause in the failure of the appellants to have discharged tax liability when they should have. However, on being pointed out by the Department, they have paid up the differential tax liability along with interest thereon - penalty u/s 78 do not sustain - appeal allowed in part.

Summary

Issues:
Demand of service tax liability on GTA services for transportation of mined iron ores, imposition of penalty under Section 78 of the Finance Act, 1994.

Analysis:
The appeal addressed the demand of service tax liability on GTA services for transporting mined iron ores and the imposition of a penalty under Section 78 of the Finance Act, 1994. The appellant had paid the service tax amount before the issuance of the Show Cause Notice (SCN), seeking relief from the penalty. The confusion regarding the taxability of services related to mining activities was resolved by Circulars issued by the CBEC. The Revenue relied on judgments like CCE, Chandigarh Vs. M/s. Stesalit Ltd. and Dhandayuthapani Canteen Vs. Cestat, Chennai to support their contention.

The Tribunal noted the lack of clarity on the disputed issue until clarified by the Board through Circulars. It referenced landmark judgments like UOI. Dharmendra Textile Processors and UOI Vs. Rajasthan Spinning and Weaving Mills to emphasize that penalties under Section 78 should be imposed when specific conditions are met, such as suppression of facts, misstatement, or fraud. In this case, as these adverse factors were absent, the Tribunal found no justification for penalizing the appellant with an amount equal to the duty determined under Section 78. The Tribunal highlighted that under the Finance Act, Section 80 provided for waiving penalties if there was a reasonable cause for failing to discharge service tax liability.

The Tribunal concluded that the appellant had reasonable cause for the failure to discharge tax liability, especially considering the mitigating factors such as paying the differential tax liability and interest upon being notified by the Department. As a result, the penalty imposed under Section 78 was deemed excessive and was set aside. The Tribunal partially allowed the appeal based on these considerations, maintaining the rest of the impugned order intact.