2019 (2) TMI 585 - AT - Service Tax

Imposition of penalties - invocation of section 80 of FA - cleaning services rendered by them to Indian School of Business - levy of service tax - issue in confusion - Held that - The Finance Act, 2010, with retrospective effect from 01.07.2003 clarified that profit motive is not an essential ingredient for an Institute in the field of Commercial Training or Coaching Centre Services which would mean that if an Institute is even established as a non-profit company, the fact has to be verified as to whether the service rendered is to a non-commercial organisation - We find that subsequently in the case of Indian School of Business 2008 (12) TMI 666 - CESTAT BANGALORE , the Tribunal has held that Indian School of Business is imparting education and not a commercial concern, a view which of course is now covered by retrospective amendment. The sequences of events would indicate that appellant applicant could have entertained a bonafide belief as to non leviability of tax as the services to Indian School of Business is an acceptable view and hence they have justified reasons for not collecting and paying the service tax from December 2007. This is a fit case to invoke the provisions of Section 80 of the Finance Act, 1994 - penalty set aside - appeal allowed.

Summary

Issues:
Rectification of mistake in Final Order No. A/30843- 30846/2018 regarding penalties imposed under Section 80 of the Finance Act, 1994.

Analysis:
The appellant applicant filed three applications seeking rectification in the Final Order dated 07.08.2018, where the Bench had rejected all appeals based on various Tribunal judgments. The appellant's counsel argued that penalties should be set aside under Section 80 of the Finance Act, 1994, as the appellant had stopped collecting service tax based on a belief that services to a non-profit educational institution were exempt. The Tribunal had not addressed this argument in its order, leading to a mistake on record. Citing precedents like CCE Mumbai vs. Four Circle Clothing Co., the Bench allowed the rectification application.

The appellant had informed the Superintendent Incharge in March 2008 about not collecting service tax since December 2007 for services to an educational institution, based on a Tribunal judgment. Despite this, a show cause notice was issued in 2009. The Finance Act, 2010 clarified that profit motive is not essential for institutes in "Commercial Training or Coaching Centre Services." Subsequent Tribunal rulings confirmed the educational nature of the institution, justifying the appellant's belief in non-liability for tax. Thus, invoking Section 80 of the Finance Act, 1994, the Bench set aside the penalties imposed in the appeals decided on 07.08.2018.

In conclusion, the Bench found that the appellant had a justifiable reason for not collecting and paying service tax from December 2007 due to a bona fide belief in the non-liability of tax for services to the educational institution. Therefore, the penalties imposed were set aside under Section 80 of the Finance Act, 1994. The applications for Rectification of Mistake were disposed of accordingly.