Tribunal waives penalty for IP services, upholds service tax demand.

The Tribunal partially allowed the appeal by waiving the penalty under Section 78 for intellectual property services but upheld the service tax demand and interest payment already made by the appellant.

---

---

Issues:
1. Reduction of service tax demand
2. Waiver of penalties under Sections 77 and 78 for renting of immovable property service
3. Upholding penalty related to demand on Intellectual Property service

Analysis:
1. The appeal was against the modification of the Order-in-Original by the Commissioner (Appeals), reducing the service tax demand from Rs. 9,10,592 to Rs. 6,20,019. The appellant did not contest the service tax demand and interest payment but contested the penalty of Rs. 1,91,924 imposed under Section 78 for the demand related to intellectual property services.

2. The appellant argued that they believed their activities were non-taxable due to confusion in the field and sought immunity under Section 80 of the Act for penalties imposed. They had entered a royalty agreement with another company and believed that since VAT was paid on the agreement amount, the use of goodwill would not attract service tax. The appellant maintained that they had no intention to evade tax and had accounted for the transaction in their books.

3. The Revenue argued that the appellant did not contest the penalty for intellectual property services before the Commissioner (Appeals) and cited a case to support their position. They also mentioned that the extended period was applicable as the department was unaware of the appellant's activities due to non-disclosure.

4. The Tribunal examined the submissions and records. It noted that the appellant had indeed contested the penalty and sought waiver under Section 80 in their grounds before the Commissioner (Appeals). The Tribunal found that the appellant had reasonable cause for non-payment of service tax on time, as they believed the services were not taxable and had paid the tax and interest once the confusion was clarified. The Tribunal concluded that the appellant had shown reasonable cause and set aside the penalty under Section 78 for intellectual property services, while upholding the service tax demand and interest payment.

In conclusion, the Tribunal partially allowed the appeal by waiving the penalty under Section 78 for intellectual property services but upheld the service tax demand and interest payment already made by the appellant.

---