2009 (1) TMI 216 - AT - Service Tax

Tribunal overturns penalties for service tax non-payment, emphasizing need for clear evidence of tax evasion.

The Tribunal set aside the Commissioner's order imposing penalties under sections 76, 77, and 78 for non-payment of service tax for convention services. ... Convention Services - appellant stated that they were paying service tax in respect of banquet halls let out for marriage functions but since banquet halls given for business meetings was a part of package and was not separately charged for, they were under the impression that no Service Tax is payable on the same and accordingly did not pay - However, on being pointed out by the department that service tax in such case will be payable under the Head “Convention Services” they readily agreed to pay the same along with interest – held that - Mere detection by the department does not mean that non-payment was with intention to evade unless the department brings out clear facts that the appellant was in the know that service tax was payable on such services but still the assessee chose not to pay the tax in order to evade the same – penalty is not leviable. Issues:1. Appellants not paying service tax for convention services provided.2. Discrepancy in imposition of penalties under sections 76, 77, and 78.3. Commissioner's exercise of Revisional power and imposition of penalties.Issue 1: Appellants not paying service tax for convention services provided:The appellants were providing convention services taxable since 16-8-2002 but did not pay service tax despite having a registration for Mandap Keeper service. They argued that charges for banquet halls and conference halls were included in room rent under yearly business contracts. The Deputy Commissioner confirmed duty and interest but did not impose penalties due to lack of intention to evade tax. The Commissioner, in a revisional review, issued a fresh show-cause notice alleging suppression of facts to evade tax. The Commissioner imposed penalties under sections 76, 77, and 78, which the appellants contested.Issue 2: Discrepancy in imposition of penalties under sections 76, 77, and 78:The appellants argued that the Commissioner's show-cause notice went beyond the original notice by alleging wilful suppression, which was not present initially. They cited precedents where penalties were waived due to lack of evidence of suppression. The appellants maintained that their non-payment was due to ignorance and lack of trained staff, not intentional evasion. The Commissioner's order was deemed improper as it did not establish the appellants' knowledge of tax liability.Issue 3: Commissioner's exercise of Revisional power and imposition of penalties:The Tribunal found that the Commissioner's order was flawed as it exceeded the original show-cause notice's scope by alleging suppression without evidence. The Commissioner acted as an adjudicating authority rather than a Revision authority, issuing an order-in-original instead of an order-in-revision. The Tribunal held that mere detection by the department did not prove intent to evade tax unless clear facts were presented. The lack of separate charges for banquet halls raised a bona fide doubt about tax liability. Consequently, the Tribunal set aside the Commissioner's order and reinstated the order-in-original.This detailed analysis covers the issues of non-payment of service tax, discrepancies in penalty imposition, and the Commissioner's exercise of Revisional power, providing a comprehensive overview of the judgment.