2019 (7) TMI 1660 - AT - Service Tax

Tribunal overturns penalties for Service Tax on mining activity, stresses reasonable cause for exemption.

M/s. Prathyusha Associate Shipping Private Limited Versus Commissioner of Central Excise & Customs, Bhubaneswar-II

M/s. Prathyusha Associate Shipping Private Limited Versus Commissioner of Central Excise & Customs, Bhubaneswar-II - TMI Issues:1. Demand of Service Tax along with interest and penalties.2. Validity of Show Cause Notice (SCN) issuance.3. Applicability of penalty under section 78 of the Finance Act, 1994.4. Interpretation of tax liability in the case of 'mining services'.5. Precedents supporting non-imposition of penalty in similar circumstances.Analysis:1. The case involved a demand for Service Tax, interest, and penalties on an appellant engaged in Iron ore mining activity in Orissa. The appellant had already paid the demanded amount before the issuance of the Show Cause Notice (SCN). The Adjudicating Authority confirmed the demand and imposed penalties under section 78 and section 77 of the Finance Act, 1994. The appellant appealed to the Tribunal challenging the penalties imposed.2. The Tribunal noted that the appellant had paid the entire Service Tax along with interest before the SCN was issued. The Tribunal also considered the introduction of 'mining services' in 2007, causing confusion regarding taxability. However, once the tax liability was confirmed, the appellant promptly paid the amount with interest. The appellant cited various Tribunal decisions supporting non-imposition of penalties in similar situations.3. The Authorized Representative for the Revenue defended the impugned order, justifying the penalties imposed. After hearing both parties and examining the records, the Tribunal found that the issue was settled by a previous decision involving similar circumstances. The Tribunal referred to the decision in the case of Commissioner of Service Tax, Kolkata Versus Ruhit Shukla & Associated, which emphasized the importance of reasonable cause for penalty exemption under Section 80 of the Finance Act, 1994.4. The Tribunal concluded that the facts of the present case aligned with the principles established in the referenced decision. Therefore, the impugned orders confirming penalties on the appellant were set aside, and the appeal was partly allowed. The Tribunal emphasized the relevance of reasonable cause for penalty exemption and the impact of public relation announcements on taxpayer compliance with tax obligations.5. The judgment highlighted the significance of timely tax liability discharge, the confusion surrounding new tax regulations, and the applicability of penalty exemptions under the Finance Act, 1994. The decision provided clarity on penalty imposition based on reasonable cause and the impact of public announcements on taxpayer behavior.