2013 (4) TMI 3 - AT - Service Tax

Tribunal overturns penalties for incorrect service categorization, deems Section 76 penalty unjustified.

MANDOVI MOTORS PVT. LTD. Versus COMMISSIONER OF C. EX., MANGALORE

MANDOVI MOTORS PVT. LTD. Versus COMMISSIONER OF C. EX., MANGALORE - 2012 (284) E.L.T. 110 (Tri. - Bang.) , 2012 (28) S.T.R. 184 (Tri. - Bang.) Issues:1. Classification of services rendered by the appellant under 'Authorized Service Station Service' or 'Business Auxiliary Service.'2. Demand of service tax, interest, and penalties by the Department.3. Imposition of penalty under Section 76 of the Finance Act, 1994.Analysis:1. The appellant, an authorized dealer and service provider for a motor vehicle brand, was providing extended warranty services to customers without disclosing it to the Department. The Department issued a show-cause notice demanding service tax for the period from 1-10-2002 to 30-6-2007. The adjudicating authority classified the services under 'Authorized Service Station Service,' demanding service tax, interest, and penalties. The Commissioner (Appeals) set aside the demand under this category, holding that the appellant was not liable for it. The Commissioner directed the re-quantification of demand under 'Business Auxiliary Service' and set aside penalties under Sections 77 and 78, except for penalty under Section 76, which the appellant challenged.2. The appellant contended that the Commissioner exceeded the show-cause notice's scope by confirming the demand under 'Business Auxiliary Service.' The appellant voluntarily paid service tax under this category before the notice was issued. The Tribunal agreed that the demand under 'Authorized Service Station Service' was not sustainable, as the appellant had already paid under 'Business Auxiliary Service.' The Tribunal upheld the payment and appropriation made by the appellant, setting aside the penalty under Section 76 of the Finance Act, 1994. The Tribunal concluded that the penalty imposition was not justified, given the circumstances.3. The Tribunal upheld the appropriation of service tax and interest paid by the appellant, as it was not contested. However, the imposition of penalty under Section 76 of the Finance Act, 1994 was set aside, and the appeal was allowed to that extent. The Tribunal found that the Commissioner had exceeded the scope of the show-cause notice, leading to the incorrect imposition of penalties. The appellant's voluntary payment under 'Business Auxiliary Service' was considered valid, and the penalty under Section 76 was deemed unsustainable in light of the circumstances.