2008 (2) TMI 69 - AT - Service Tax

Tribunal remands case for penalty redetermination, stresses Commissioner's discretion

The Tribunal upheld the penalty imposition under Section 76 of the Finance Act, 1994, but remanded the case for redetermination of the penalty amount, ... Service tax paid on GTA service, by availing credit on other input services - tax on GTA service had to be paid in cash – assessee paid up impugned service tax in cash after reversing the input service tax credit only at the hearing stage - reasonable cause not constituted for purposes of Section 80 - decision of the revisional authority to impose penalty u/s 76 is justified – since no reason shown in revision order for imposing penalty on higher side, matter is remanded for re-quantification Issues:1. Availment of Cenvat credit on input services for payment of service tax on Goods Transport Agency (GTA) service.2. Imposition of penalty under Section 76 of the Finance Act, 1994.3. Applicability of Section 80 of the Finance Act, 1994 regarding penalty imposition.Analysis:Issue 1: Availment of Cenvat credit on input services for payment of service tax on GTA serviceThe appellants, engaged in the manufacture of textile products, had paid service tax on GTA service by availing Cenvat credit on other input services. The department issued a show-cause notice objecting to this practice. The appellants argued that GTA service could be treated as output service, justifying the Cenvat credit. However, during the adjudication process, they reversed the input service tax credit and paid service tax in cash for GTA service. The Commissioner revised the decision, imposing a penalty under Section 76 of the Finance Act, 1994. The Tribunal noted that the appellants' actions were not voluntary, as they contested the demand initially, only rectifying the error later. The Tribunal upheld the penalty imposition but remanded the case to redetermine the penalty amount, criticizing the lack of discretion exercised by the Commissioner.Issue 2: Imposition of penalty under Section 76 of the Finance Act, 1994The revisional authority imposed a penalty on the assessee under Section 76 of the Finance Act, 1994, for failure to pay service tax in cash on GTA service. The Tribunal found that the penalty imposition was legally sustainable as the appellants contested the demand despite being aware of the legal position. However, the Tribunal remanded the case to the Commissioner to redetermine the penalty amount, noting the lack of discretion exercised by the Commissioner in choosing the penalty rate.Issue 3: Applicability of Section 80 of the Finance Act, 1994 regarding penalty impositionThe appellants invoked Section 80 of the Finance Act, 1994, claiming reasonable cause for their failure to pay service tax in cash on GTA service within time. The Tribunal rejected this argument, stating that the appellants' actions were not voluntary, as they contested the demand before rectifying the error. The Tribunal upheld the penalty imposition but remanded the case for the redetermination of the penalty amount, emphasizing the need for the Commissioner to exercise discretion in imposing the penalty rate.In conclusion, the Tribunal upheld the penalty imposition under Section 76 of the Finance Act, 1994, but remanded the case for the redetermination of the penalty amount, emphasizing the necessity for the Commissioner to exercise discretion in choosing the penalty rate.