2018 (9) TMI 660 - AT - Service Tax

Tribunal overturns penalties under Finance Act, 1994, citing genuine belief, timely tax payment, and reasonable cause.

Kohinoor Properties, Gobind Builders & Developers Versus Commissioner of Central Excise Pune I

Kohinoor Properties, Gobind Builders & Developers Versus Commissioner of Central Excise Pune I - TMI Issues:- Non-payment of service tax on taxable services- Imposition of penalties under the Finance Act, 1994- Applicability of Section 80 for waiver of penaltiesAnalysis:Issue 1: Non-payment of service tax on taxable servicesThe appellants were engaged in providing taxable services but did not pay the service tax for the disputed period initially. Upon detection by service tax officers, the appellants deposited the service tax along with interest. Show-cause notices were issued, and after adjudication, the service tax demand along with interest was confirmed. The appellants contended that since they had paid the full amount before the notices, penalties should be set aside. They argued that the non-payment was due to a genuine belief that the services would not be subject to service tax, citing relevant Tribunal decisions supporting their stance. The Tribunal noted that the issue of taxability was contentious, as clarified by the Bombay High Court judgment in favor of Revenue. Considering the genuine belief of the appellants and the payment made before notices, the Tribunal found merit in setting aside penalties.Issue 2: Imposition of penalties under the Finance Act, 1994The impugned order confirmed the service tax demand, interest, and imposed penalties on the appellants under various provisions of the Finance Act, 1994. However, the Tribunal, after considering the facts and the appellants' genuine belief, invoked Section 80 of the Act to waive the penalties imposed under Sections 77 and 78. The Tribunal referenced a previous case where penalties were set aside under similar circumstances, emphasizing the bona fide belief of the appellants and the contentious nature of the taxability issue. Ultimately, the Tribunal found no merit in upholding the penalties and allowed the appeals in favor of the appellants concerning the penalties imposed on them.Issue 3: Applicability of Section 80 for waiver of penaltiesThe Tribunal invoked Section 80 of the Finance Act, 1994, to grant relief to the appellants from the penalties imposed under Sections 77 and 78. Citing the appellants' genuine belief, the Tribunal highlighted the reasonable cause shown for waiver of penalties. By considering the contentious nature of the taxability issue and the timely payment of service tax along with interest, the Tribunal found that penalties should not be imposed in such circumstances. Relying on consistent views in similar cases and relevant judgments, the Tribunal set aside the penalties under Sections 77 and 78, upholding only the service tax and interest paid by the appellants.In conclusion, the Tribunal allowed the appeals in favor of the appellants, setting aside the penalties imposed under Sections 77 and 78 of the Finance Act, 1994, based on the genuine belief of the appellants and the timely payment of service tax along with interest before the issuance of show-cause notices.