2009 (12) TMI 327 - AT - Service Tax

Penalty- . Service tax demand has been confirmed on the value of service towards TDS for income tax purpose, contributions to PF and ESI. In this case issue of penalty involve. Held that- the amount relating to TDS, PF & ESI was actually not received by the appellant but deposited with the concerned department. Thus, it can not be said that appellant made a mistake in not including the same for the purpose of payment of service tax. Thus it is a fit case for waiver of penalty under Section 80 of Finance Act, 1994.

Summary

Issues:
1. Service tax demand confirmed on the value of service towards TDS for income tax purpose, contributions to PF, and ESI.
2. Challenge against penalty imposition under Section 76 and Section 78 of Finance Act, 1994.

Analysis:
The appeal before the Appellate Tribunal involved a concise issue where service tax demand was upheld on the value of services related to TDS for income tax, PF, and ESI contributions. The liability for service tax was acknowledged by the appellants, who had already paid the full amount along with applicable interest. The sole contention pertained to the imposition of penalties under Section 76 and Section 78 of the Finance Act, 1994.

During the proceedings, the appellant's representative argued that the issue was primarily legal, as the appellants genuinely believed they were not obligated to pay service tax on amounts related to TDS, PF, and ESI. Upon realization, they promptly settled the tax with interest, seeking a lenient view on penalties and requesting a waiver under Section 80 of the Finance Act, 1994. Reference was made to a previous Tribunal decision supporting the argument for relief under Section 80 based on the legal nature of the issue.

In response, the Senior Departmental Representative contended that the issue was not raised before the original adjudicating authority, questioning its acceptance at this stage. However, the appellant's representative highlighted that the issue was indeed mentioned in the grounds of appeal, as noted by the Commissioner (Appeals). The Tribunal considered the submissions from both sides, emphasizing that the amounts related to TDS, PF, and ESI were not received by the appellants but directly deposited with the respective departments. Drawing parallels with a prior case involving similar circumstances, the Tribunal agreed with the appellant's argument for penalty waiver under Section 80, given the legal interpretation involved.

Furthermore, the department had appealed against the Commissioner (Appeals) decision to reduce the penalty under Section 78 to 25%. However, in light of the Tribunal's ruling that no penalty should be imposed and the necessity for a lenient approach invoking Section 80, the department's appeal was rejected. Consequently, both appeals were disposed of accordingly, with the Tribunal emphasizing the legal interpretation aspect and the need for penalty waiver under Section 80.

In a final note, the Tribunal addressed a contention regarding the certification of statements submitted by the appellant, highlighting that despite the lack of certification by a Chartered Accountant, the issue could not be revisited due to the advanced stage of the proceedings. The Tribunal rejected the contention, emphasizing the importance of timely considerations during the legal process.