2015 (9) TMI 47 - AT - Service Tax

Tribunal Overturns Penalties for Service Tax Non-Payment

M/s. Vibha Agrotech Ltd. Versus Commissioner of Customs, Central Excise And Service Tax, Hyderabad-IV

M/s. Vibha Agrotech Ltd. Versus Commissioner of Customs, Central Excise And Service Tax, Hyderabad-IV - TMI Issues:Penalties imposed under service tax law for GTA services received by the appellant.Analysis:The appellant, engaged in research, production, and marketing of seeds, claimed exemption from excise duty and VAT on sales. They were unaware of the requirement to pay service tax under the Reverse Charge Mechanism for GTA services. Upon notification by Central Excise officers, they promptly paid the service tax along with interest. The issue revolved around whether the appellant's lack of payment was due to malafide intent.Section 73(3) of the Finance Act, 1994, states that if an assessee pays the short-paid or non-paid service tax on their own or based on tax ascertained by a Central Excise Officer, no notice under subsection (1) shall be served. However, this provision does not apply in cases involving fraud, collusion, willful misstatement, or suppression.The appellant argued that their exemption from excise duty and VAT led them to believe that service tax was not applicable to them. They contended that upon being informed of their liability, they promptly paid the service tax before any show-cause notice was issued. Citing precedents like Ratindranath K. Kanungo vs. Commissioner of Central Excise, Ahmedabad and Commissioner of Central Excise, Mumbai vs. Aquanet, the appellant highlighted that penal provisions are not invoked when there is a reasonable cause for non-payment.The Tribunal found merit in the appellant's contentions and set aside the penalties imposed, acknowledging that the demand for duty and interest was not contested. The decision was based on the appellant's genuine belief in their exemption status and their prompt payment upon notification, aligning with the principles laid down in relevant legal precedents.In conclusion, the judgment focused on the appellant's lack of awareness regarding the Reverse Charge Mechanism for service tax on GTA services, leading to a reasonable belief in their exemption status. The Tribunal's decision to set aside the penalties was supported by legal provisions and previous case law, emphasizing the importance of genuine intent and prompt compliance upon notification in such matters.