Tribunal rules in favor of appellant, penalties under Finance Act not applicable.

The Tribunal held that penalties under Sections 76 and 78 of the Finance Act, 1994 were not applicable to the appellant. The delay in payment of service tax was attributed to confusion over the reverse charge mechanism and delayed responses from ICICI Bank, not intentional wrongdoing. As the entire service tax along with interest had been paid, the penalties were set aside, and the appeal was allowed in favor of the appellant.

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Issues:
1. Imposition of penalties under Sections 76 and/or 78 of the Finance Act, 1994 on the appellant.

Analysis:
The appellant had received External Commercial Borrowings (ECB) for a Windmill Project in India and paid a sum to ICICI Bank, Hong Kong, which was later deemed leviable to service tax under Section 66A of the Finance Act, 1994. The Revenue raised an objection during a CERA Audit, leading to a show cause notice for payment and penalties. The appellant contended that they were not disputing the service tax liability but contested the imposition of penalties under Sections 76 and 78. They had sought clarification from ICICI Bank in India regarding the tax liability, which was responded to in November 2009, leading to the payment of service tax and interest. The delay in payment was attributed to confusion over the reverse charge mechanism and not due to any mala fide intention.

The Revenue reiterated the findings of the Commissioner (Appeals) regarding the penalties. However, the Tribunal found merit in the appellant's argument. The dispute over the levy of service tax under the reverse charge mechanism during the relevant period was resolved only after a decision by the Bombay High Court. The delay in payment was not due to any intentional wrongdoing by the appellant but was a result of delayed responses from ICICI Bank. Considering that the entire service tax along with interest had been paid by the appellant, the Tribunal held that penalties under Sections 76 and 78 of the Finance Act, 1994 were not applicable. As a result, the impugned order directing the imposition of penalties was set aside, and the appeal was allowed to that extent. The appeal was disposed of in favor of the appellant.

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