Appeal partially allowed for service tax demand; penalties set aside due to good faith payment

The appellant's appeal against the confirmation of a service tax demand under Tour Operator Service for the period 2001-2002 to 2003-2004 was partially allowed. The Tribunal found that the appellant had paid the disputed tax amount in good faith due to confusion surrounding the applicability of service tax to tour operators. As a result, the penalties imposed were set aside, granting the appellant relief under Section 80 of the Finance Act, 1994.

---

---

Issues:
Service tax demand confirmation under Tour Operator Service for the period 2001-2002 to 2003-2004, waiver of interest and penalty based on Notification 15/2007-ST, applicability of exemption notification to stage carriage.

Analysis:
The appeal was filed against the confirmation of a service tax demand of Rs. 16,081 for the period 2001-2002 to 2003-2004 under Tour Operator Service. The appellant's representative acknowledged unfavorable judgments in similar cases but requested waiver of interest and penalty. The appellant argued that Notification 15/2007-ST, issued under Sec. 11C of the Central Excise Act, indicated a prevalent practice of not paying service tax for services provided by tour operators under contract carriage permits. The appellant contended that this notification supported their belief that service tax was not payable, justifying the request for waiving penalties.

The Departmental Representative (DR) opposed the appellant's argument, stating that the exemption under Notification 15/2007-ST was specific to contract carriage and did not extend to stage carriage services provided by the appellant. The Tribunal considered both sides' contentions and noted that the appellant had already paid the disputed service tax amount, indicating a lack of malicious intent and a genuine belief in non-liability. The Tribunal highlighted the text of Notification 15/2007-ST, which acknowledged a prevalent practice of not levying service tax on tour operators providing services under contract carriage permits during a specific period.

The Tribunal concluded that the confusion surrounding the applicability of service tax was evident even for contract carriage operators, making it reasonable for the appellant to believe they were not liable to pay service tax. Therefore, the appellant was deemed eligible for the benefit of Section 80 of the Finance Act, 1994. Consequently, the appeal was partially allowed, setting aside the penalties imposed in the impugned order by invoking the provisions of Section 80 of the Finance Act, 1994.

---