2012 (9) TMI 73 - AT - Service Tax

Tribunal overturns tax demand & penalties due to procedural errors, remands for reevaluation

The Tribunal set aside the order confirming the Service tax demand and penalties imposed on the appellant for non-payment of Service tax, citing a ... Demand of service tax – penalty - services of rent-a-cab operator – Held that:- Activities were covered under Section 65(91) read with Section 65(105)(o) of the Finance Act, 1994 and hence, the same attracted Service tax - adjudicating authority has confirmed the demand by calculating the Service tax at the applicable rate on the gross amount received by them without considering the exemption under Notification No. 2/06-S.T. - matter is remanded to the Commissioner for de novo adjudication after considering the appellant’s claim for exemption under Notification No. 2/06-S.T. Issues:1. Non-payment of Service tax by the appellant for the period 2000-2001 to 2003-2004.2. Imposition of penalties under Sections 75A, 76, 77, and 78 of the Finance Act, 1994.3. Invocation of longer limitation period under Section 73(1) for confirming the Service tax demand.4. Alleged violation of principles of natural justice in passing the impugned order.5. Eligibility of the appellant for 60% abatement under Notification No. 2/06-S.T.6. Consideration of exemption under Notification No. 2/06-S.T. for rent-a-cab service.Analysis:1. The appellant, engaged in the business of running a guest house and rent-a-cab service, was found to have not paid Service tax despite receiving a substantial amount. A show cause notice was issued for non-payment of Rs. 55,15,370 along with penalties under various sections of the Finance Act, 1994.2. The Commissioner upheld the Service tax demand and imposed penalties on the appellant, including penalties under Sections 75A, 76, 77, and 78 of the Finance Act, 1994, citing deliberate non-payment of tax and failure to file returns.3. The longer limitation period under Section 73(1) was invoked to confirm the Service tax demand, considering the deliberate non-payment by the appellant.4. The appellant contended that the impugned order violated principles of natural justice as it was passed without their knowledge. They argued against the imposition of penalties and claimed eligibility for 60% abatement under Notification No. 2/06-S.T.5. The appellant's plea for exemption under Notification No. 2/06-S.T. was not considered in the original order. The Tribunal found merit in this argument and set aside the impugned order, remanding the matter to the Commissioner for reevaluation considering the exemption claim.6. The Tribunal highlighted the need to assess the appellant's eligibility for exemption under Notification No. 2/06-S.T. and predecessor notifications, emphasizing the importance of considering such exemptions in determining the Service tax liability for rent-a-cab services provided by the appellant during the disputed period.