2009 (7) TMI 121 - AT - Service Tax

Appellate Tribunal waives penalties, considers firm's size, compliance efforts in service tax appeal

Pratik Enterprises Versus Commissioner, Central Excise & Customs, Vapi

The Appellate Tribunal CESTAT, Ahmedabad set aside penalties imposed on a proprietary firm for service tax demand confirmation and highlighted the firm's ... Waiver of penalty – section 80 – held that - appellant is an individual and is a proprietary firm and in view of the fact that he co-operated with the investigations and paid the service tax with interest as applicable, lenient view as regards penalty is required to be taken. The fact that the firm is a proprietary firm and a small firm going by the size of transaction is sufficient as a reasonable cause of the purpose of section 80 of Finance Act, 1994. Accordingly, the penalties imposed on the appellants are set aside and appeals are allowed with consequential relief to the appellants. Issues: Service tax demand confirmation, Penalty imposition under Finance Act, 1994, Request for lenient view on penalty, Reasonable cause for lenient view under section 80 of Finance Act, 1994The judgment by the Appellate Tribunal CESTAT, Ahmedabad involved a case where a proprietary firm engaged in C&F services faced a service tax demand confirmation of Rs. 69,038 for a specific period, along with penalties imposed under various sections of the Finance Act, 1994. The appellant, through their advocate, argued for a lenient view on the penalty due to the firm's small size and prompt payment of the tax liability with interest before the completion of the adjudication process. The advocate highlighted that the total duty liability was only Rs. 70,000 over almost five years, indicating the firm's small scale of operations. The advocate requested consideration under section 80 of the Finance Act, 1994, for a lenient approach. The opposing party, the learned SDR, contended that a reasonable cause must be demonstrated to warrant a lenient view under section 80, which, in their opinion, was lacking in this case.Upon reviewing the arguments presented by both sides, the Technical Member of the Tribunal acknowledged that the appellant, being an individual running a proprietary firm, had cooperated with the investigations and promptly settled the service tax liability along with interest. Considering the nature of the firm as small-scale based on transaction size, the Technical Member deemed this a reasonable cause for invoking section 80 of the Finance Act, 1994. Consequently, the penalties imposed on the appellant were set aside, and the appeals were allowed, providing consequential relief to the appellants. The judgment emphasized the importance of considering the circumstances of small firms and their compliance efforts in determining the application of penalties under tax laws.