2009 (4) TMI 125 - AT - Service Tax

Tribunal overturns penalties for service tax omission pre-2005, emphasizing compliance and lack of deliberate fraud.

The penalties imposed under Sections 76 and 77 of the Finance Act, 1994 for omission of payment of service tax on Goods Transport Service before ... GTA Service – Penalty - Board’s Circular Letter F.No. 341/18/2004-TRU (Pt.) dated 17.12.2004 which clarifies that in case of omission of payment of service tax or procedural lapses by persons liable to pay service tax on goods transport by road, committed before 31.12.2005, the consequences should be limited to recovery of tax with interest payable thereon and no penalty should be imposed on such defaulters unless the default is due to deliberate fraud, collusion, suppression of facts, or willful mis-statement or contravention of the provisions of service tax with intent to evade payment of the same. – Penalties set aside Issues: Imposition of penalties under Sections 76 and 77 of the Finance Act, 1994 for omission of payment of service tax on Goods Transport Service before 31.12.2005.Analysis:1. The appellants contested the imposition of penalties for the period Jan. to Mar.'05 on Goods Transport Service, despite having paid the tax amount and interest. The issue revolved around penalties as per Board's Circular Letter F.No. 341/18/2004-TRU (Pt.) dated 17.12.2004, which limited consequences to recovery of tax with interest unless defaults involved deliberate fraud, collusion, suppression, or contravention of tax provisions with intent to evade payment. In this case, no such allegations were made against the appellants, leading to the conclusion that penalties under Sections 76 and 77 were excessive and unsustainable.2. The judgment highlighted that penalties under Section 76 and Section 77 of the Finance Act, 1994 were set aside as they exceeded the prescribed maximum of Rs.1,000/- and were not justified in the absence of deliberate fraud, collusion, suppression, or contravention of service tax provisions with intent to evade payment. The decision was made after considering the appellants' compliance with tax and interest payments, emphasizing that penalties should not be imposed without clear evidence of intentional wrongdoing.3. The Tribunal, through the Vice President, Ms. Jyoti Balasundaram, waived the pre-deposit of penalty and proceeded to decide the appeals due to the common issue at hand. The judgment clarified that penalties should be imposed judiciously, in line with the provisions of the law, and not in excess of the prescribed limits unless there is clear evidence of fraudulent activities or intentional evasion of tax liabilities. The decision to set aside the penalties under Sections 76 and 77 was based on the lack of evidence supporting such allegations against the appellants.