2016 (11) TMI 1229 - AT - Service Tax

Tribunal overturns penalties for tax error, citing professional advice and lack of intent.

M/s Gujarat State Road Transport Corporation Versus Commissioner (Appeals), Service Tax, Ahmedabad

M/s Gujarat State Road Transport Corporation Versus Commissioner (Appeals), Service Tax, Ahmedabad - 2017 (49) S.T.R. 176 (Tri. - Ahmd.) Issues:Imposition of penalty under Section 76 and 78 of the Finance Act, 1994, and the applicability of Section 80 of the Finance Act, 1994.Analysis:The case involved an appeal against an order passed by the Commissioner (Appeals) concerning the imposition of penalties under Section 76 and 78 of the Finance Act, 1994. The appellant, a public sector undertaking, provided taxable services under the category of 'Sale of Space or Time for Advertisement.' Initially, based on advice from their empanelled Tax Consultant, they did not pay Service Tax as they were informed it was not applicable to public sector undertakings. However, upon realizing their mistake, they paid the entire Service Tax amount with interest and registered with the Central Excise Department. A show cause cum demand notice was issued, leading to the imposition of penalties under Sections 76 and 78 of the Finance Act, 1994. The appellant contended that there was no intention to evade tax, citing advice from reputable consultants and timely payment of the tax liability after discovering the error. The appellant argued for the invocation of Section 80 of the Finance Act, 1994, due to reasonable cause for the initial failure to discharge the Service Tax liability. The Revenue, represented by the Authorized Representative, supported the findings of the Commissioner (Appeals).The key issue before the Tribunal was whether the penalties imposed under Sections 76 and 78 of the Finance Act, 1994, should be upheld or if the appellant's case warranted the application of Section 80 of the Act. The appellant, being a public sector undertaking, relied on expert advice in tax matters and sought an opinion from a reputable Chartered Accountant firm regarding the applicability of Service Tax on their services. Upon receiving advice that Service Tax was not applicable, they did not pay the tax initially. However, upon further inquiry and realization of their mistake, they paid the entire tax amount with interest. The Tribunal acknowledged that the appellant's initial failure to pay tax was due to a bona fide mistake based on professional advice. Considering the circumstances and the timely payment of the tax liability upon discovery of the error, the Tribunal found the appellant's reasons to be reasonable and invoked Section 80 of the Finance Act, 1994.In conclusion, the Tribunal set aside the order confirming the penalties imposed by the Adjudicating Authority and allowed the appeal to that extent. The Tribunal found in favor of the appellant, recognizing the reasonable cause for the initial failure to discharge the Service Tax liability and invoking Section 80 of the Finance Act, 1994.