2019 (5) TMI 1101 - AT - Service Tax

Demand of Interest and penalties - sale space or time for advertisement - delayed payment of service tax - Rule 6 of Service Tax Rules 1994 - application of time limitation for demand of interest and penalties - difference of opinion - majority order - HELD THAT - Admittedly, the Referral Bench itself extended the benefit of Section 80 of Finance Act, 1994 holding that the appellants were under bonafide belief that they were not liable to pay service tax as they have deposited service tax on monthly basis. In that circumstance, I hold that the demand of interest is barred by limitation. Therefore, I agree with the view expressed by the Hon ble Member (Judicial). The Registry is directed to place matter before the Referral Bench for further proceedings.

Issues Involved:
1. Taxability and demand of service tax.
2. Interest on delayed payment of service tax.
3. Imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994.
4. Applicability of Section 80 of the Finance Act, 1994 for waiver of penalties.
5. Limitation for demand of interest.

Issue-wise Detailed Analysis:

1. Taxability and Demand of Service Tax:
The appellants had provided taxable service under the category of "sale of space or time for advertisement" to a client. The service became taxable from 01.05.2006. Two agreements, dated 07.10.1999 and 05.03.2005, were entered into by the appellant, with payments received before the service tax levy date. The Revenue argued that service tax was payable on the value of services rendered after the tax levy date. The appellant did not contest the taxability and demand but only the interest and penalty.

2. Interest on Delayed Payment of Service Tax:
The appellant argued that they had computed and paid service tax on a pro-rata basis as advised by the investigating officer and deposited the amounts monthly. They contended there was no justification for interest on a lump sum payment. The Revenue, relying on a Board Circular dated 05.11.2003, argued that service tax should be paid on a lump sum basis for advance payments received for services rendered after the tax levy date. The Tribunal upheld the demand for interest, stating that the statutory requirement for paying interest on the demanded amount as required by the statute overrides any previous departmental advice.

3. Imposition of Penalties under Sections 76, 77, and 78 of the Finance Act, 1994:
The original adjudicating authority confirmed the demand along with interest and imposed penalties under Sections 76, 77, and 78. The Commissioner (Appeals) upheld the penalties under Sections 77 and 78 but set aside the penalty under Section 76. The Tribunal found that the appellants were in regular correspondence with the department and acted on the advice given by the investigating officer. Therefore, suppression could not be alleged, and the benefit of Section 80 was applicable, leading to the setting aside of penalties.

4. Applicability of Section 80 of the Finance Act, 1994 for Waiver of Penalties:
The Tribunal noted that the appellants acted in line with the instructions of the Department and there was no suppression of facts. The benefit of Section 80 was granted, setting aside the penalties imposed under Sections 76, 77, and 78.

5. Limitation for Demand of Interest:
A difference of opinion arose between the Members regarding the demand of interest. The Member (Technical) upheld the interest demand, while the Member (Judicial) held that the demand was barred by limitation, citing the Hon'ble Delhi High Court's decision in Kwality Ice Cream Company vs. Union of India. The third Member (Judicial) agreed with the Member (Judicial) that the demand of interest was barred by limitation, thus setting aside the interest demand.

Majority Order:
The majority order concluded that the assessee's appeal was allowed by setting aside the interest and penalty, and the Revenue's appeal was rejected.

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