Tribunal grants relief to appellant in service tax case, emphasizes tax liability discharge and inclusive service tax value.

The Tribunal set aside the penalty imposed on the appellant for the confirmation of demand of service tax, considering the confusion and doubts regarding their liability. It held that the appellant should be allowed the benefit of Section 73(3) of the Finance Act as they promptly discharged the tax liability after clarification. The Tribunal emphasized that the value of taxable service is inclusive of service tax unless specified otherwise under Section 67(2) of the Finance Act, and since there was no evidence that the amount collected was exclusive of service tax, the benefit of Section 73(3) should not have been denied.

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Issues:
Confirmation of demand of service tax, imposition of penalty, applicability of Section 73(3), interpretation of Section 67(2) of the Finance Act, 1994.

Confirmation of demand of service tax and imposition of penalty:
The appeal was filed against the confirmation of demand of service tax and penalty. The appellant argued that they were exempted from service tax at the material time based on a clarification issued by CBEC. However, after an amendment in the Finance Act in 2010, they registered in 2010 but had doubts about the liability to pay service tax. They voluntarily paid the service tax, interest, and late fee before a show cause notice was issued. The appellant contended that they had accepted the liability and thus should be allowed the benefit of Section 73(3) of the Finance Act. The revenue argued that since the service tax liability was not discharged initially, the benefit of Section 73(3) should not be extended. The Tribunal noted that the appellant discharged the tax liability promptly after it was pointed out, and there was confusion due to doubts about their liability. The Tribunal considered Section 67(2) of the Finance Act, which states that the value of taxable service is inclusive of service tax unless specifically mentioned otherwise. As there was no evidence that the amount collected was exclusive of service tax, the benefit of Section 73(3) should not have been denied. Consequently, the penalty imposed on the appellant was set aside.

Applicability of Section 73(3):
The appellant argued that they had accepted the liability for service tax before the issuance of the show cause notice and should be allowed the benefit of Section 73(3) of the Finance Act. However, the revenue contended that since the service tax liability was not initially discharged, the benefit of Section 73(3) should not be extended. The Tribunal found that the appellant promptly discharged the tax liability after it was pointed out and had doubts regarding their liability, leading to confusion. The Tribunal held that the benefit of Section 73(3) should not have been denied considering the circumstances.

Interpretation of Section 67(2) of the Finance Act, 1994:
The Tribunal analyzed Section 67(2) of the Finance Act, which states that the value of taxable service is considered inclusive of service tax unless specified otherwise. The appellant argued that they had discharged the service tax liability after availing the benefit of this provision, and thus the benefit of Section 73(3) should not have been denied. The Tribunal found no merit in the department's argument that the benefit of Section 67(2) could not be extended. As there was no evidence that the amount collected was exclusive of service tax, the Tribunal concluded that the appellant should not have been denied the benefit of Section 73(3).

This judgment highlights the importance of promptly addressing tax liabilities, the interpretation of relevant provisions of the Finance Act, and the implications of accepting tax liability voluntarily.

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