2023 (11) TMI 827 - AT - Service Tax

Time Limitation - suppression of facts or not - Invocation of Section 80 for setting aside the penalties in regard to the demand of Service Tax for the normal period - demand of short-paid Service Tax along with interest and penalties - HELD THAT - On perusal of the Show Cause Notice in Paragraph 6, it is merely stated that though the Department requested for furnishing particulars of income earned under the Banking and Financial Services, the appellant had not furnished the same. This cannot be a ground for alleging suppression. Moreover, the Department has issued a Show Cause Notice for the earlier period. Being so, the Show Cause Notice issued invoking extended period for the subsequent period cannot sustain. There is no positive act of suppression brought forth and established by the Department to establish intent to evade payment of Service Tax - the Show Cause Notice is therefore time-barred. Invocation of Section 80 for setting aside the penalties in regard to the demand of Service Tax for the normal period - HELD THAT - From the facts and evidences narrated as above, we find that the issue is wholly interpretational in nature and the appellant who is engaged in manufacture was under bona fide belief that their activity of Bill Discounts given to suppliers of spare parts could not amount to activity under Banking and Financial Services - the appellant has given plausible explanation for non-payment of Service Tax during the disputed period. The penalties imposed therefore requires to be set aside. The impugned order is modified to the extent of setting aside the demand for the extended period and confirming the demand for the normal period. The penalties imposed for the normal period are also set aside - Appeal allowed in part.

Summary

Issues involved:
The issue involved in this case pertains to whether the amounts received by the appellant as "Bill Discounts" would fall under the taxable service as per Section 65 (12) of the Finance Act, 1994 in the category of "Banking and Other Financial Services."

Summary of Judgment:

Issue 1 - Taxability of "Bill Discounts" under Banking and Financial Services:
The appellant, engaged in the manufacture of automotive components, had been making payments to suppliers after 60 days, deducting 5% of the value for early payments, shown as income received under "Bill Discounts." The Department contended that these amounts would fall under taxable services as Banking and Financial Services. Show Cause Notice was issued for demanding short-paid Service Tax, interest, and penalties. The original authority and Commissioner (Appeals) upheld the demand. However, the Tribunal found that the appellant's activity did not fall under Banking and Financial Services as they were not a banking or financial company. The appellant's belief that their activity did not fall under such services was considered plausible, and penalties were set aside for the normal period.

Issue 2 - Allegation of Suppression of Facts and Invocation of Extended Period:
The Department alleged that the appellant suppressed facts by not furnishing details of income earned under Banking and Financial Services within the requested time, invoking the extended period for the Show Cause Notice. The Tribunal noted that no positive act of suppression was established against the appellant, and the Show Cause Notice was deemed time-barred. While part of the disputed period fell within the normal time, the appellant was held liable to pay for that period.

Conclusion:
The Tribunal modified the impugned order by setting aside the demand for the extended period and confirming it for the normal period. Penalties imposed for the normal period were also set aside. The appeal was partly allowed with consequential relief, if any, as per law.