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Issues: (i) Whether the service tax demand under the rent-a-cab service category was to be worked out on cum-duty basis; (ii) whether penalties under sections 76, 77 and 78 of the Finance Act, 1994 were leviable when the service tax liability was disputed.
Issue (i): Whether the service tax demand under the rent-a-cab service category was to be worked out on cum-duty basis.
Analysis: The appellant had not charged service tax separately in the invoices. On that basis, the tax liability was required to be computed on cum-duty basis, which reduced the demand from the amount originally confirmed.
Conclusion: The demand was to be determined on cum-duty basis and was reduced accordingly.
Issue (ii): Whether penalties under sections 76, 77 and 78 of the Finance Act, 1994 were leviable when the service tax liability was disputed.
Analysis: The liability under rent-a-cab service had been a subject of dispute and doubt. In such circumstances, the benefit of doubt was given to the appellant, and penalty was held to be unwarranted.
Conclusion: No penalty was leviable under sections 76, 77 and 78 of the Finance Act, 1994.
Final Conclusion: The appeal succeeded to the extent of reduction of the tax demand and deletion of penalties, with consequential relief.
Ratio Decidendi: Where service tax is not separately charged in the invoice, the demand is to be computed on cum-duty basis, and penalty is not warranted when the tax liability itself was disputed and doubtful.
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