2011 (9) TMI 408 - AT - Service Tax

Appellate Tribunal upholds service tax demand for photography services, no penalty due to lack of clarity

CCE, Jalandhar/Ludhiana Versus M/s. Classic Colour Lab (P) Ltd.

The Appellate Tribunal CESTAT, New Delhi, allowed the Revenue's appeals, confirming the service tax demand and interest, as the cost of material used in ... Service tax - Whether,the service falling under the category of photography, the cost of material used is required to be added in the value of services or not - he issue stands covered by the larger bench decision of the Tribunal in the case of Aggarwal Colour Advance Photo System (2011 -TMI - 205988 - CESTAT, NEW DELHI (LB)) - It stands held that the value of such material is required to be added in the value of services.Penalty - Commissioner (Appeals) has held in favour of the respondents, thus, indicating the issue involved is of interpretation of law, which can be considered a factor lending to bonafide belief to the respondents not to include the value of cost of material so used in the value of services - As such,in the absence of malafide on the part of the respondents, the imposition of penalty upon them is not justified. Issues:1. Whether the cost of material used in providing photography services should be added to the value of services for the purpose of service tax.Analysis:The Appellate Tribunal CESTAT, New Delhi, comprising Mrs. Archana Wadhwa and Mr. Rakesh Kumar, JJ., heard appeals filed by the Revenue against the order of the Commissioner (Appeals). The central issue in question was whether the cost of material used in providing photography services should be included in the value of services for service tax purposes. Both parties agreed that this issue had been addressed in a previous decision by a larger bench of the Tribunal in the case of Aggarwal Colour Advance Photo System. The Tribunal had ruled in that case that the value of such material must indeed be added to the value of services. Consequently, the impugned order was set aside, and the Revenue's appeals were allowed, leading to the confirmation of the service tax demand along with interest.Regarding the penalty aspect, the Tribunal noted that the issue was not clear during the relevant period and was only clarified by the larger bench decision. Given this lack of clarity, the Tribunal found that no malafide intent could be attributed to the respondents. Moreover, the Commissioner (Appeals) had ruled in favor of the respondents, indicating that the matter involved an interpretation of the law, which could have reasonably led the respondents to believe that the cost of material need not be included in the value of services. Consequently, the Tribunal held that since there was no malafide on the part of the respondents, imposing a penalty on them was not justified. Therefore, the Revenue's appeals were allowed only to the extent of confirming the service tax demand and interest, with no penalty imposed on the respondents. The judgment was pronounced in open court by the Tribunal.