2019 (2) TMI 86 - AT - Service Tax

Penalty - Non-discharge of Service Tax - appellant has paid major part of the service tax demand much before issuance of the SCN - Held that - The reason for omission to pay the service tax is explained by them - appellant were filing returns as well as were paying service tax under the event management service. Thereafter Business Exhibition Service came to be introduced, with effect from 10.9.2004. They did not discharge the service tax for the reason of confusion as to the classification of service - On being instructed by the department in January 2005, they had remitted the service tax. It is also brought out that the appellants have not collected service tax separately and therefore the amount received should be considered as cum-tax value - The request of the appellant is reasonable and tenable. It is a fit case for invoking Section 80 of the Finance Act to set aside the penalties imposed - the adjudicating authority shall requantify the service tax after giving the cum-tax benefit as well as the CENVAT credit benefit to the appellant - Appeal allowed.

Summary

Issues:
- Applicability of service tax on business exhibition service
- Confusion regarding classification of services
- Liability to pay service tax
- Imposition of penalties

Analysis:
The case involved the appellants engaged in providing business exhibition services who had not paid service tax on the consideration received. The original authority confirmed the demand for service tax, interest, and penalties. The Commissioner (Appeals) upheld the demand but allowed the appellant to furnish documents for availing CENVAT credit. The appellants contended that they were confused about whether their exhibitions fell under event management or business exhibition services. They claimed to have paid service tax after being instructed by the department, albeit the quantification in the show cause notice was disputed. The Tribunal noted the confusion faced by the appellants and held that they should be given the benefit of cum-tax value and CENVAT credit. Consequently, the penalties imposed were set aside under Section 80 of the Finance Act. The demand for service tax was to be recalculated considering the cum-tax benefit and CENVAT credit, leading to the appeal being allowed with consequential benefits.

The key issue revolved around the confusion regarding the classification of services provided by the appellants, specifically whether their exhibitions constituted event management or business exhibition services for service tax purposes. The appellants argued that they had paid service tax on event management services until the introduction of business exhibition services under the service tax net. They claimed that the failure to pay service tax for business exhibitions was due to this confusion and not a deliberate attempt to evade taxes. The Tribunal acknowledged this confusion and directed the adjudicating authority to consider the appellants' payments in light of the confusion, granting them the benefit of cum-tax value and CENVAT credit.

Regarding the liability to pay service tax, the Tribunal found that while the appellants had not collected service tax separately for the exhibitions, they had paid a significant portion of the demand before the show cause notice was issued. The appellants' explanation for not paying service tax on business exhibitions due to the confusion surrounding the classification of services was considered reasonable. The Tribunal held that the adjudicating authority should recalculate the service tax demand, taking into account the cum-tax value and CENVAT credit, thereby reducing the liability from the originally demanded amount.

Lastly, the issue of imposing penalties was addressed by the Tribunal. It was deemed that the penalties imposed on the appellants were unwarranted given the circumstances of confusion and the steps taken by the appellants to rectify the situation upon being instructed by the department. Consequently, the Tribunal invoked Section 80 of the Finance Act to set aside the penalties, providing relief to the appellants in this regard.