Tribunal grants relief from penalty, imposes 25% on service tax demand. Waives penalty under section 76.

The Tribunal partially allowed the appeal, granting relief from penalty for the earlier period but imposing a penalty of 25% of the service tax demand for the subsequent year. The penalty under section 76 was waived, considering the circumstances and the introduction of the law in July 2003.

---

---

Issues:
1. Whether the appellant was liable to pay service tax under the category of "business auxiliary service" for promoting banking and financial services.
2. Whether the appellant's ignorance of the service tax liability until a circular was issued justifies a waiver of penalty.
3. Whether the appellant's actions demonstrate deliberate withholding of taxes and unjust benefit from public funds.

Analysis:
1. The appellant initially paid service tax as a provider of authorized service station service. However, the revenue alleged that the appellant was actually promoting banking and financial services for funding loans, falling under "business auxiliary service" attracting service tax. The service was provided from July 2003 to March 2005. The appellant claimed ignorance of the tax liability until a circular in 2006 clarified it. The appellant argued that penalty should not apply due to delayed awareness, citing a judgment from the High Court of Allahabad.

2. The representative for Revenue contended that the appellant should have paid the tax immediately upon becoming aware of the liability, rather than waiting for the circular. The Revenue argued against waiving the penalty, emphasizing the appellant's obligation to discharge tax liability promptly. The Tribunal considered both sides and examined the record to determine the appellant's conduct regarding tax compliance.

3. The Tribunal found that the appellant had received a significant amount for the service provided while being a dealer of Hyundai Cars, indicating awareness of the tax liability. Despite the appellant's early payment of tax upon discovering the liability, the Tribunal concluded that the appellant had deliberately withheld taxes to benefit from public funds. The Tribunal noted the appellant's education and past tax compliance as factors in the decision. Ultimately, the Tribunal partially allowed the appeal, granting relief from penalty for the earlier period but imposing a penalty of 25% of the service tax demand for the subsequent year. The penalty under section 76 was waived, considering the circumstances and the introduction of the law in July 2003.

---