2008 (4) TMI 150 - AT - Service Tax

Appeal allowed, penalties set aside for delayed tax payment.

The appeal was allowed, setting aside the penalties imposed under Sections 76 and 78 of the Finance Act, 1994. The Appellant, an Authorised Automobile ... Imposition of penalty for delay/non-payment of service tax - invocation of bona fide waiver under Section 80 - voluntary payment of service tax before issuance of show cause notice - trade confusion as ground for relief where levy clarified by Board Circular - service tax leviability on commission for arranging financeImposition of penalty for delay/non-payment of service tax - invocation of bona fide waiver under Section 80 - voluntary payment of service tax before issuance of show cause notice - trade confusion as ground for relief where levy clarified by Board Circular - Whether penalties imposed on the appellant under the Finance Act for non-payment/delay in payment of service tax on commission received for arranging finance are exigible where the levy was clarified by a Board Circular and tax was deposited voluntarily before issuance of show cause notice. - HELD THAT: - The Tribunal found that prior to the Board's Circular dated 6.11.2006 there was confusion in trade about whether commission received by authorised automobile dealers/service stations for introducing customers to financial institutions attracted service tax. Following the Board's clarification, the appellant deposited the service tax voluntarily before any show cause notice was issued and subsequently paid interest. Having regard to the existence of genuine doubt resolved by the Board Circular and the appellant's bona fide conduct in voluntarily paying tax before adjudication, the Tribunal applied the principle embodied in Section 80 to relieve the appellant from penal consequences. The Tribunal also relied on earlier decisions holding that penalty is not imposable in similar circumstances of bona fide confusion regarding levy. The Tribunal found no mala fide on the part of the appellant and held that imposition of penalties was not warranted.Penalties imposed under the Finance Act are set aside; the appeal is allowed.Final Conclusion: Where a Board Circular clarified the levy and the assessee voluntarily deposited the service tax (and interest) before issuance of show cause notice, the Tribunal found the delay bona fide and set aside the penalties under the Finance Act, allowing the appeal. Issues:Imposition of penalty under Sections 76 and 78 of the Finance Act, 1994 for rendering services under the category of 'Authorised Automobile Service Station' and receiving commission from Financial Institutions.Analysis:The Appellant filed an appeal against the penalty imposed under Sections 76 and 78 of the Finance Act, 1994 for providing services as an 'Authorised Automobile Service Station' and receiving commission from Financial Institutions. The Central Board of Excise & Customs clarified through Circular No. 87/05/2006-S.T. that Service Tax is leviable on such activities. The Adjudicating Authority confirmed the tax demand and imposed penalties under various sections of the Act. The Commissioner (Appeals) upheld the Adjudication Order.The Appellant argued that there was confusion regarding the levy of tax, which was resolved by the Board Circular dated 6.11.2006, following which the Appellant paid the tax before the show cause notice was issued. The Appellant claimed to have acted in good faith and invoked Section 80 of the Act. They cited precedents like the case of Vipul Motors (P) Ltd. Vs. CCE, Jaipur and the Financiers Vs. CCE, Jaipur to support their argument.The Departmental Representative reiterated the Commissioner (Appeals)'s findings, stating that there was no confusion regarding the tax levy on the activity in question. They emphasized that the Board's Circular was issued on 6th November 2006, and the tax was paid by the Appellant on 6.2.2007, justifying the imposition of penalties under various sections of the Act.Upon review of the records and the Board's Circular dated 6.11.2006, it was noted that there was confusion in the trade regarding the tax liability on the commission received by automobile dealers from Financial Institutions. The Appellant, registered under Service Tax as an Authorised Service Station, was directed to pay the tax by the Central Excise Authorities. Following the Board's Circular, the Appellant voluntarily paid the tax before the show cause notice was issued. The Tribunal's decision in the case of Vipul Motors (P) Ltd. supported that penalties were not applicable for delayed tax payments in such scenarios, invoking Section 80 of the Act due to the absence of mala fide intent on the Appellant's part.Consequently, the penalties were deemed unwarranted, and the appeal was allowed, setting aside the penalties imposed under Sections 76 and 78 of the Finance Act, 1994.