2008 (11) TMI 182 - AT - Service Tax

Remand for Penalty Waiver Reconsideration: Genuine Reasons Required for Tax Non-payment

COMMISSIONER OF C. EX., LUDHIANA Versus STAR CARGO CONSULTANT

The Tribunal remanded the case for reconsideration of penalty waiver under Section 80 of the Finance Act, emphasizing that waiver should be based on ... Waiver of Penalty u/s 80 – service tax was paid prior to issuance of show cause notice - waiver of penalty cannot be granted just because the service tax had been paid prior to the issue of show cause notice - But if the non-payment of service tax was due to some bona fide reason on the part of the assessee and the assessee on being pointed out paid the service tax, the waiver of penalty under Section 76, 77 or 78 would be merited - But since the question as to whether in view of the facts of the case, waiver of penalty under Section 80 is warranted, has not been considered in the impugned order, the impugned order is set aside and the matter is remanded to the Commissioner (Appeals) for considering as to whether in view of the facts of this case, waiver of penalty under Sections 76, 77 & 78 was warranted under Section 80 of the Finance Act. Issues:1. Whether penalty under Sections 76, 77, and 78 should be imposed on the respondent for non-payment of service tax.2. Whether the waiver of penalty under Section 80 of the Finance Act should be considered in this case.Analysis:Issue 1:The case involved a dispute regarding the imposition of penalties under Sections 76, 77, and 78 on the respondent for not paying service tax on an amount received as compensation for not performing certain jobs. The Department contended that the amount received by the respondent should be treated as taxable service for cargo handling, thus making them liable for service tax. The respondent argued that the amount in question was received from contractors/custodians, not clients, and there was confusion regarding the applicability of service tax. The Commissioner (Appeals) upheld the service tax demand but set aside the penalties, citing that the tax had been paid before the show cause notice. The Tribunal noted that the waiver of penalty cannot be automatic when tax is paid before the notice but should be considered if there was a genuine reason for non-payment. As the lower authority did not assess the case under Section 80 of the Finance Act, the matter was remanded for a reconsideration of whether the penalty waiver was warranted based on the facts presented.Issue 2:The key contention revolved around whether the penalty waiver under Section 80 should be granted to the respondent. The Departmental Representative argued that the mere payment of service tax before the notice should not automatically lead to penalty waiver. On the other hand, the respondent contended that there was a genuine reason for the non-payment, as the amount in question was compensation for unperformed jobs received from contractors/custodians, not clients. The respondent emphasized that they paid the tax promptly upon clarification from the Department. Referring to a previous Tribunal order, the respondent sought the application of Section 80 for penalty waiver, which requires proving a reasonable cause for tax non-payment. The Tribunal agreed that if non-payment was due to a bona fide reason and rectified promptly upon notice, the penalty waiver could be considered under Section 80. Therefore, the Tribunal remanded the case to the Commissioner (Appeals) for a reassessment of the penalty waiver under Sections 76, 77, and 78 in light of the provisions of Section 80 of the Finance Act.In conclusion, the Tribunal set aside the previous order and remanded the case for a fresh consideration on the penalty waiver under Section 80, emphasizing that the waiver should be assessed based on the genuine reasons for non-payment and prompt rectification rather than just the timing of tax payment before the show cause notice.