Tribunal waives penalty for non-payment of service tax due to genuine belief

The tribunal set aside the penalty imposed on the appellant under Section 78 of the Finance Act for non-payment of service tax, amounting to Rs. 1,67,22,095, due to a genuine belief that services to State Governments were not taxable. The appellant promptly paid the tax upon receiving a show cause notice, demonstrating no mala fide intent to evade duty. The tribunal confirmed the demand for service tax and interest but waived the penalty, considering the appellant's reasonable belief and lack of malicious intent.

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Issues: Penalty under Section 78 of the Finance Act, 1994

Analysis:
The appellant, engaged in 'Banking and Financial Services,' was penalized for not paying service tax amounting to Rs. 1,67,22,095 in relation to services provided to a specific entity. The appellant contended that they believed services to State Governments were not taxable, hence the non-payment. They rectified the situation by paying the tax promptly upon receiving a show cause notice. The appellant, being a public sector undertaking of the Government of India, argued there was no mala fide intent to evade duty. The tribunal acknowledged the appellant's genuine belief and lack of evidence of mala fide intent, leading to the decision to set aside the penalty under Section 78 and Section 77 of the Finance Act. The demand for service tax and interest was confirmed, but the penalty was waived due to the appellant's reasonable belief and lack of malicious intent.

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