2023 (7) TMI 918 - AT - Service Tax

Levy of penalty - providing internet service to customers through cable - service tax liability accepted - HELD THAT - The issue is no longer res integra having been decided by the Tribunal in the case of M/S CITY CABLE OPERA VERSUS C.C.E CHANDIGARH 2020 (2) TMI 227 - CESTAT CHANDIGARH where though the issue has been decided in favour of the Revenue, the appellant s contention on penalty need to be examined. Reliance placed in the case of COMMISSIONER OF CENTRAL EXCISE VERSUS M/S. PANNU PROPERTY DEALERS, LUDHIANA 2010 (7) TMI 255 - PUNJAB AND HARYANA HIGH COURT where the Hon ble High Court did not categorically hold that the imposition of penalty under Section 76 and Section 78 separately is not mutually exclusive prior to 10.05.2008, Hon ble High Court has certainly held that the Appellate Authority was within its right to hold that the penalty is mutually exclusive and in the spirit of the amendment. While the amount involved in the above case was Rs.51,026/-, the amount involved in the instant case is about half that amount. Therefore, in deference to the jurisdictional High Court s order, the penalty under Section 76 and 78 can be seen to be mutually exclusive even before the amendment. In the facts and circumstances of the case and looking into the fast changes that were coming in the Service Tax law during the relevant period, it can be concluded that the appellant being a small operator had no wherewithal to keep track of the law and thus, the applicability of the Service Tax to him, more so looking into the fact that the main cable operator M/s SIFY had discharged Service Tax on the entire amount collected from the customers, there are reasons to believe that there were sufficient reasons for the appellant in not discharging the applicable Service Tax. Looking into the conduct of the appellants in depositing the tax with interest and 25% penalty the provisions of Section 80 are invited and the benefits of Section 80 can be extended to the appellants. The penalties imposed are not sustainable - Appeal allowed in part.

Summary

Issues involved: Determination of service tax liability on Cable TV Operators providing services to a company, imposition of penalties under Sections 76 & 78 of Finance Act, 1994, applicability of Section 80 of the Finance Act, 1994.

Service Tax Liability: The Department investigated Cable TV Operators (CTOs) appointed by a company to provide internet services, revealing that the CTOs installed necessary infrastructure and received commission based on user payments. The Department alleged the CTOs provided "Business Auxiliary Services" and demanded service tax through show-cause notices. The Commissioner (Appeals) reduced the demand, leading to the appeal.

Penalties Imposition: The appellants accepted duty liability but contested penalties. They deposited the total duty amount and argued against the penalties. The Tribunal referred to a previous case and examined the issue of penalties, considering the arguments presented by the appellants.

Legal Precedent: The Tribunal referenced a case from the Hon'ble Punjab & Haryana High Court regarding the imposition of penalties under Sections 76 and 78 of the Act. The High Court's decision influenced the Tribunal's analysis of the penalties imposed on the appellants in the current case.

Applicability of Section 80: The appellants claimed that they were not given the benefit of Section 80 of the Finance Act, 1994, which provides for the non-imposition of penalties if there was a reasonable cause for the failure to comply with tax provisions. The Tribunal considered the circumstances and changes in the Service Tax law during the relevant period, concluding that the appellants, being small operators, had valid reasons for not discharging the applicable Service Tax.

Decision: After evaluating the arguments and legal provisions, the Tribunal found that the penalties imposed on the appellants were not sustainable. Considering the circumstances and conduct of the appellants, the Tribunal set aside the penalties and partially allowed the appeal in favor of the appellants.