2014 (3) TMI 946 - AT - Service Tax

Tribunal Upholds Waiver of Penalties for Lack of Awareness

CCE, Kanpur Versus M/s. C Solanki

CCE, Kanpur Versus M/s. C Solanki - TMI Issues:1. Whether the activity of providing vehicles to BSNL for transportation of employees constitutes a taxable service of rent-a-cab.2. Whether the penalties imposed on the respondent under various sections of the Finance Act, 1994 are justified.3. Whether the waiver of penalties by the Commissioner (Appeals) under Section 80 of the Finance Act, 1994 was correct.Analysis:1. The respondent provided vehicles to BSNL under an agreement, charging minimum fees for a certain distance and additional charges thereafter. The department alleged this activity fell under the taxable service of rent-a-cab and issued a show cause notice for service tax demand, interest, and penalties. The Asstt. Commissioner confirmed the service tax demand and imposed penalties. On appeal, the Commissioner (Appeals) upheld the service tax demand but waived penalties under various sections, citing the absence of clarity in the agreement regarding service tax payment. The Tribunal noted the confusion regarding the applicability of service tax under rent-a-cab operator's service during the disputed period and found that the respondent, being unaware of the service tax liability due to lack of clarity in the law, did not deliberately evade tax payment. Therefore, the waiver of penalties under Section 80 was deemed appropriate, and the Revenue's appeal was dismissed.2. The Revenue contended that the respondent's ignorance of the law regarding service tax on rent-a-cab service was not a valid defense, as the law had been in effect since July 1997. However, the Tribunal considered the specific circumstances of the case, where the contract with BSNL did not mention service tax, and there was ambiguity regarding the applicability of service tax to the respondent's activity. Given the lack of clarity and the absence of willful tax evasion, the Tribunal upheld the waiver of penalties by the Commissioner (Appeals) under Section 80 of the Finance Act, 1994.3. The Tribunal emphasized that the respondent's agreement with BSNL did not address service tax, and there was no evidence of the respondent collecting service tax from BSNL but not remitting it to the Government. The Tribunal also referenced a previous case where service tax was not attracted when charges were based on distance traveled by the vehicle. Considering these factors, the Tribunal found no fault in the Commissioner (Appeals) decision to waive penalties under Section 80, as the respondent's lack of awareness about the service tax liability was deemed reasonable under the circumstances. Thus, the appeal by the Revenue was dismissed, affirming the waiver of penalties on the respondent.