2016 (3) TMI 902 - AT - Service Tax

Tribunal sets aside penalties for government body's service tax exemption belief

Ahmednagar Cantonment Board Versus Commissioner of Central Excise, Aurangabad

The Tribunal allowed the appeal, setting aside penalties imposed on the appellant under Sections 76, 77, and 78 of the Finance Act, 1994. The appellant, ... Seeking setting aside of penalty imposed under Section 76, 77 and 78 of the Finance Act, 1994 - Invokation of Section 80 of the Finance Act, 1994 - Evasion of Service tax liability on the amount collected as licence fee - Hiring out the shops if falling under the category of “Renting of Immovable Property” - Appellant discharged its entire service tax liability and also interest thereof during the pendency of proceedings - Held that:- the bonafide impression carried by the appellant herein cannot be called in doubt that being an autonomous body they are exempted from payment of service tax and hence did not obtain registration. Therefore, the appellant had made out a justifiable cause for non-discharge of service tax liability during the period in question, accordingly by invoking the provisions of Section 80 of the Finance Act, 1994, the penalties imposed are set aside. - Decided in favour of appellant Issues:1. Service tax liability on licence fee collected by the appellant.2. Imposition of penalties under Section 76, 77, and 78 of the Finance Act, 1994.3. Invocation of Section 80 of the Finance Act, 1994 for setting aside penalties.Analysis:Issue 1: Service tax liability on licence fee collectedThe appellant, an autonomous body under the Cantonments Act, 1924, constructed commercial properties and leased them by collecting licence fees. The Revenue alleged evasion of service tax on these fees between June 2007 to December 2011. The appellant eventually paid the service tax and interest. The adjudicating authority confirmed the liability and imposed penalties. The appellant argued exemption due to being a government body. The Tribunal noted the appellant's bonafide impression of exemption and their discharge of the tax liability during proceedings. The Tribunal found no evidence contradicting the appellant's belief in exemption, leading to setting aside the penalties.Issue 2: Imposition of penalties under Section 76, 77, and 78The appellant appealed against penalties imposed under Sections 76, 77, and 78 of the Finance Act, 1994. The Tribunal considered the appellant's status as an autonomous government body and their good faith belief in exemption from service tax. Referring to precedent, the Tribunal held that in cases involving government bodies, there is no mala fide intention to evade tax, and penalties should not be imposed. Citing the judgment in a similar case, the Tribunal set aside the penalties based on the appellant's bonafide impression and the provisions of Section 80 of the Finance Act, 1994.Issue 3: Invocation of Section 80 for setting aside penaltiesThe Tribunal analyzed whether penalties under Section 76, 77, and 78 should be set aside by invoking Section 80 of the Finance Act, 1994. Considering the appellant's autonomous government body status, their belief in exemption, and the absence of evidence contradicting this belief, the Tribunal found justification to set aside the penalties. The Tribunal referred to a previous judgment involving government bodies to support its decision. Consequently, the penalties imposed by the adjudicating authority and upheld by the first appellate authority were set aside by invoking Section 80 of the Finance Act, 1994.In conclusion, the Tribunal allowed the appeal, setting aside the penalties imposed on the appellant under Sections 76, 77, and 78 of the Finance Act, 1994, based on their autonomous government body status and bonafide belief in exemption from service tax.