2012 (7) TMI 257 - AT - Service Tax

Appeal Dismissed, Penalty Set Aside: Section 78 vs. Section 80 Decision

Commr. of Service Tax- Kolkata Versus M/s. Gujral Distributors

The Tribunal dismissed the appeal against the penalty under Section 78 of the Finance Act, 1994, upholding the Commissioner's decision to invoke Section ... Invocation of section 80 - Service of Rent-A-Cab scheme to another operator of rent-a-cab – non-payment of service tax under the bonafide belief that Service Tax is not applicable to them as they were providing services of rent-a-cab operator to another rent-a-cab operator and not to clients directly as per circular of CBEC bearing F. No. B 43/7/97-TRU dated 11.07.97 - Additional Commissioner's denial of benefit on the ground of non-segregation of amount fortifies the reason of their bonaflde belief that their service was not taxable - Additional Commissioner did not show any reason why the appellant's appeal and grounds for invocation of section 80'could not be given any cognizance to – Held that:- They paid the tax and interest when non-applicability of the said notification was pointed out to them without going into any dispute. This bona fide conduct as also argument of the appellant showing sufficient and reasonable cause for the failure certainly call for invocation of I section 80 of the Act – Commr. (Appeals) has rightly invoked Section 80 of the Finance Act. Issues:Appeal against imposition of penalty under Section 78 of the Finance Act, 1994 for non-payment of service tax under Rent-A-Cab scheme between operators during 2002-03 to 2005-06. Interpretation of bonafide belief, applicability of circular by CBEC, invocation of Section 80 of the Finance Act, 1994, and adherence to Supreme Court judgments.Analysis:The appeal involved a dispute regarding the imposition of a penalty under Section 78 of the Finance Act, 1994 on the respondent for not discharging service tax under the Rent-A-Cab scheme provided to another operator during 2002-03 to 2005-06. The respondent believed that they were exempt from service tax as per a circular by CBEC. However, upon audit scrutiny, they paid the service tax but were penalized by the adjudicating authority. The Commissioner (Appeal) set aside the penalty under Section 78 and invoked Section 80 of the Finance Act, 1994. The Revenue contended that the penalty should still apply, citing Supreme Court judgments. The Tribunal noted the respondent's bonafide belief, timely tax payment, and the Commissioner's analysis, upholding the invocation of Section 80 and dismissing the Revenue's appeal.The key contention was whether the penalty under Section 78 of the Finance Act, 1994 was justified given the respondent's bonafide belief and subsequent tax payment. The respondent argued that their belief in exemption under the circular led to non-payment initially, rectified promptly upon audit scrutiny. The Commissioner (Appeal) considered this bonafide conduct and invoked Section 80, which the Revenue challenged. The Tribunal upheld the Commissioner's decision, emphasizing the respondent's genuine belief and timely tax payment as reasons to invoke Section 80, dismissing the Revenue's appeal.The Tribunal scrutinized the facts, focusing on the respondent's payment post-audit, bonafide belief, and the Commissioner's reasoning for invoking Section 80. The Revenue's argument, citing Supreme Court judgments, was countered by the Tribunal's observation that the adjudicating authority had not followed the Supreme Court's principles in imposing the penalty. Consequently, the Tribunal upheld the invocation of Section 80 by the Commissioner, dismissing the Revenue's appeal for lack of merit.In conclusion, the Tribunal's detailed analysis centered on the respondent's bonafide belief, timely tax payment, and the Commissioner's decision to invoke Section 80 of the Finance Act, 1994. The Tribunal found the Revenue's arguments lacking, as the penalty imposition did not align with the Supreme Court's principles. Therefore, the appeal against the penalty under Section 78 was dismissed, affirming the Commissioner's decision to invoke Section 80 in light of the circumstances surrounding the case.