CESTAT Chennai: Appeal Partially Allowed, Penalties Set Aside. Liability Determined from 18.04.06. Relief under Section 80.

The appellate tribunal CESTAT, Chennai, partially allowed the appeal in a service tax case, setting aside penalties imposed under Sections 76 and 78 of the Finance Act. The tribunal determined the liability of the assessees to pay tax from 18.04.06 onwards, with the demand for the period before that date being set aside for re-determination. The assessees were granted relief under Section 80 based on a circular stating that services provided outside Indian territorial waters were not taxable.

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In the appellate tribunal CESTAT, Chennai, the case involved a service tax demand of Rs. 1,22,56,765, interest, and penalties imposed on the assessees for receiving Business Auxiliary Services from a foreign provider. The tribunal considered the liability of the assessees to pay tax from 18.04.06 onwards based on legal precedents. The demand for the period prior to 18.04.06 was set aside, and the tax liability was to be re-determined. While the assessees did not dispute the penalty under Section 77, they sought relief under Section 80, citing a circular that stated services provided outside Indian territorial waters were not taxable. The tribunal accepted the assessees' plea, setting aside penalties imposed under Sections 76 and 78 of the Finance Act. The appeal was partly allowed with consequential relief for the appellants.

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