Tribunal waives penalty under Section 78 for service tax non-payment, imposes late fees for specific period.

The Tribunal partly allowed the appeal, waiving the penalty under Section 78 due to the appellant's bonafide belief in not paying service tax. Late fees were imposed only for the period from July 2012 to March 2013 for non-filing or delayed filing of ST-3 returns, with no late fee charged for the period before July 2012.

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Issues:
1. Service tax demand confirmation and appropriation.
2. Recovery of interest and penalty imposition.
3. Recovery of late fee for delayed filing of ST-3 returns.
4. Bonafide belief in non-payment of service tax.
5. Waiver of penalty under Section 78.
6. Imposition of late fee for non-filing of ST-3 returns.

Service Tax Demand Confirmation and Appropriation:
The appeal was against an Order-in-Original confirming a service tax demand of Rs. 26,36,363 for the period from 1/7/2012 to 31/3/2013. The Commissioner confirmed the demand, appropriated the amount already paid, imposed interest, and penalty under relevant sections of the Finance Act, 1994. The appellant, engaged in providing services to a state electricity distribution company, was found to have paid less service tax than required, leading to the demand. The demand for the period prior to 1/7/2012 was dropped due to a government exemption notification. The appellant appealed for waiver of penalty and late fee.

Bonafide Belief in Non-Payment of Service Tax:
The appellant argued a bonafide belief in not paying service tax, citing confusion within the department regarding taxability of services provided to state government electricity distribution companies. The appellant believed services were exempted, given a government notification and the introduction of a negative list of services in the Union Budget of 2012. The appellant paid most of the demanded amount before the show cause notice and the rest after, along with interest. The appellant claimed they had reasonable cause for non-payment and requested a waiver of penalty under Section 80 of the Finance Act, 1994.

Waiver of Penalty under Section 78:
The Tribunal found merit in the appellant's argument, acknowledging the confusion surrounding the levy of service tax on the services provided. Considering the bonafide belief held by the appellant and the payment made before adjudication, the Tribunal waived the penalty imposed under Section 78 invoking Section 80 of the Finance Act.

Recovery of Late Fee for Delayed Filing of ST-3 Returns:
Regarding the late fee for delayed filing of ST-3 returns, the Tribunal noted that no late fee could be charged for the period before 1/7/2012. However, as the service tax liability confirmed and paid by the appellant was for the period from July 2012 to March 2013, the appellant was liable for late fee for non-filing or delayed filing of ST-3 returns for that specific period under Section 70 read with Rule 7C of the Service Tax Rules, 1994.

In conclusion, the Tribunal partly allowed the appeal, waiving the penalty under Section 78 based on the bonafide belief of the appellant and imposing late fee only for the period from July 2012 to March 2013 for non-filing or delayed filing of ST-3 returns.

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