2019 (4) TMI 1689 - AT - Service Tax

Tribunal sets aside penalties under Finance Act, emphasizes no intent to evade payment.

M/s. Chhatisgarh State Co-operative Marketing Federation Ltd. Versus Commissioner of Service Tax, Raipur

M/s. Chhatisgarh State Co-operative Marketing Federation Ltd. Versus Commissioner of Service Tax, Raipur - TMI Issues:1. Imposition of penalty under sections 76, 77, and 78 of the Finance Act, 1994.Analysis:The case involved an organization in the cooperative sector in Chhattisgarh that provided services of renting out godowns to fertilizer manufacturing companies. The Department discovered that the organization had not paid service tax on the rent collected for the godowns during a specific period. The organization deposited the outstanding service tax amount before a show cause notice was issued. The Commissioner confirmed the service tax demand and imposed penalties under sections 76, 77, and 78 of the Finance Act, 1994.The organization did not contest the service tax confirmation but challenged the imposition of penalties. They argued that there was a genuine confusion regarding the taxability of renting immovable property services during the relevant period. They cited a Delhi High Court decision and amendments to the definition of renting immovable property under the Finance Act. The organization claimed they deposited the service tax with interest promptly after being approached by authorities, demonstrating no intent to evade payment.The Tribunal noted that the organization maintained proper records of the transactions and promptly paid the service tax upon notification by authorities. They highlighted that penalties under the Finance Act are for intentional evasion, which was not the case here. The Tribunal referred to various decisions supporting their view that in cases of genuine confusion, penalties should not be imposed. Citing a specific Tribunal decision, they emphasized that penalties should not apply if the assessee proves reasonable cause for the failure to pay tax.Ultimately, the Tribunal upheld the service tax demand but found the penalties under sections 76, 77, and 78 legally unsustainable. They set aside the imposed penalties, partially allowing the appeal. The decision emphasized that in cases of genuine confusion and where taxes were promptly paid upon clarification, penalties should not be imposed, especially when there was no intent to evade payment.This detailed analysis showcases the legal arguments, precedents cited, and the Tribunal's reasoning in arriving at the decision to uphold the service tax demand but set aside the penalties imposed under sections 76, 77, and 78 of the Finance Act, 1994.