2008 (8) TMI 31 - AT - Service Tax

Tribunal modifies penalties for cable operators under Finance Act, 1994

The Tribunal upheld penalties under Sections 76 and 77 of the Finance Act, 1994 but modified the order by reducing the penalty under Section 76 for the ... Appellants are engaged in providing transmission of programme by Cable – penalty imposed for non-payment of tax - Appellant is a small cable operator and had no knowledge of the levy – no intention to evade payment of tax as appellant produced IT Return for calculation of the tax - appellant is not disputing the demand, therefore, the demand of tax is upheld - taking into account of levy of tax on the initial stage, the imposition of penalty u/s 78 is not proper - penalty u/s 76 & 77 is upheld Issues:1. Liability for service tax on cable services.2. Imposition of penalty under Sections 76, 77, and 78 of the Finance Act, 1994.Analysis:1. The case involved the liability of the Appellants for service tax on cable services provided to clients. The Appellants, engaged in transmitting programs by cable, were alleged to have taken services from another operator without filing tax returns or paying service tax. The Adjudicating Authority confirmed a tax demand of Rs.95,410/- and imposed penalties under Sections 76, 77, and 78 of the Finance Act, 1994. The Commissioner (Appeals) upheld this decision.2. The Appellant's Advocate argued that there was no intention to evade tax, as evidenced by the production of Income Tax Returns for tax calculation. It was contended that being a small cable operator, they were unaware of the tax levy introduced in 2002. The Advocate emphasized that the Appellant raised bills to customers and maintained records, indicating no intent to evade tax. The Appellant accepted the tax liability but sought to avoid penalties.3. The Revenue's representative supported the Commissioner's findings, alleging that the Appellant had suppressed facts discovered during scrutiny. Reference was made to a Kerala High Court decision to strengthen their argument.4. The Tribunal, after considering both sides, upheld the tax demand as the Appellant did not dispute it. However, regarding penalties, it noted the Appellant's small-scale operation and lack of intent to evade tax. The Tribunal found no evidence of suppression to justify penalty under Section 78. Citing a precedent, the Tribunal reduced the penalty under Section 76 to Rs.50,000/-, setting aside the penalty under Section 78.5. In conclusion, the Tribunal upheld penalties under Sections 76 and 77 but modified the order by reducing the penalty under Section 76. The judgment highlighted the importance of considering the circumstances of the case, especially regarding the imposition of penalties, based on the intent and actions of the taxpayer.