2019 (2) TMI 878 - AT - Service Tax

Imposition of penalty - non-payment of service tax - tax with interest paid on being pointed out - Held that - The Appellant although has not charged service tax from his clients but despite that paid the entire service tax amount prior to the receipt of the Show Cause Notice and also paid the entire interest before the issuance of the order-in-original, this is a fit case to invoke the provision of Section 80 ibid. This is a case where the Appellant has been able to show reasonable cause for delayed payment under bonafide belief as to taxability to service - the penalties imposed on the Appellant cannot be sustained - appeal allowed - decided in favor of appellant.

Summary

Issues:
Service Tax liability for "rent-a-cab service" under Finance Act, 1994; Failure to obtain Service Tax registration and pay tax; Penalty under Sections 76, 77, & 78; Applicability of Section 80 for waiver of penalties.

Analysis:
The appeal was filed against an order confirming Service Tax demand for providing "rent-a-cab service" without proper registration and tax payment. The Appellant admitted the liability but claimed to have paid the tax before the Show Cause Notice. The Revenue argued that penalties were justified due to intentional evasion. The Appellant contended ignorance of tax liability and non-recovery of tax from clients. The Revenue cited Supreme Court decisions on mandatory penalties even if tax is paid before Notice issuance.

The Appellant's compliance with tax payment before Notice and lack of intentional evasion were crucial. The Appellant's ignorance and non-recovery of tax from clients were highlighted. The Appellant's plea for waiver of penalties under Section 80 based on reasonable cause was pivotal. The Appellant's belief in non-taxability and subsequent full payment of tax were considered reasonable. The Appellant's demonstration of reasonable cause and timely tax payment led to the setting aside of penalties.

The judgment emphasized the importance of timely tax payment and demonstrated reasonable cause for penalty waiver. The Appellant's actions, despite ignorance, showed good faith in fulfilling tax obligations promptly. The decision to invoke Section 80 for penalty waiver was based on the Appellant's genuine belief and timely compliance with tax payment. This case highlighted the significance of proving reasonable cause for delayed tax payment and the impact on penalty imposition.

In conclusion, the appeal was allowed, setting aside the penalties imposed on the Appellant for Service Tax non-compliance. The judgment underscored the Appellant's genuine belief, timely tax payment, and demonstration of reasonable cause for penalty waiver under Section 80 of the Finance Act, 1994. The decision served as a reminder of the importance of fulfilling tax obligations promptly and demonstrating genuine efforts to comply with tax laws.