2023 (5) TMI 81 - AT - Service Tax

Tribunal overturns penalty for Service Tax, citing lack of intent. Appellant's compliance crucial.

M/s. Air Force Auditorium Versus The Commissioner of Service Tax, Delhi

The Tribunal set aside the penalty imposed on the appellant for Service Tax liability, citing previous orders that waived penalties due to the absence of ... Levy of Penalty - Business Auxiliary Service - empanelment fees recovered from the empanelled venders as commission shown under the head “rebate” - issue of liability of the appellant stands already decided as against the appellant and that the appellant has already deposited the amount of demand alongwith the amount of interest - HELD THAT:- It is a fit case of waiver of penalties proposed under Section 76, 77 & 78 of the Act ibid, in terms of Section 80 of the Finance Act. 1994 and even after non existence of the Section 80, it is found that being a Government defence organisation no malafide intention can be attributed to the omissions which have occurred on the part of the noticee. The Hon’ble Tribunal in similar circumstances has waived the penalties in terms of Section 80 of the Act ibid. - reliance can be placed in the case of NAGAR NIGAM, KOTA VERSUS COMMISSIONER OF CENTRAL EXCISE, JAIPUR-I [2009 (12) TMI 457 - CESTAT, NEW DELHI], COMMISSIONER OF CENTRAL EXCISE, JALANDHAR VERSUS M/S GENERAL MANAGER, TELECOM [2012 (8) TMI 499 - CESTAT, NEW DELHI] and ANDHRA PRADESH TOURISM DEVELOPMENT CORPN. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, HYDERABAD [2012 (5) TMI 346 - CESTAT, BANGALORE]. There are no reason to differ from the said findings specifically when in the present appeal also the appellant has deposited the entire amount of demand confirmed and the amount of interest imposed - the order of Commissioner (Appeals) is modified by setting aside the order of imposing penalty upon the appellant. Appeal allowed in part. ISSUES PRESENTED AND CONSIDERED 1. Whether amounts recovered from empanelled vendors as 'empanelment fees' (shown as 'rebate') constitute consideration for 'Business Auxiliary Service' and are chargeable to service tax. 2. Whether penalties under Sections 76, 77 & 78 of the Finance Act (as applied) are imposable for non-payment/non-disclosure of service tax on such empanelment fees where the assessee cooperated with the Department and there was a bona fide doubt regarding taxability. 3. Whether mens rea (intent to evade) and extended period under Section 73(1) can be invoked where record shows cooperation, disclosure of details during audit, and subsequent voluntary payment of tax and interest. 4. Whether, in view of earlier identical adjudications by the Tribunal (including a specific prior order addressing similar periods and facts), the imposition of penalty in the present period should be reconsidered or set aside. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Taxability of empanelment fees as Business Auxiliary Service Legal framework: Service tax liability is assessed where money received constitutes consideration for taxable services; 'Business Auxiliary Service' is the category applied by the Revenue. Precedent Treatment: The Order under challenge confirmed chargeability for the period in question. The Tribunal's prior order (dated 10.04.2017) on earlier, similar show-cause notices also confirmed chargeability for those periods. Interpretation and reasoning: The Revenue and the adjudicating authority treated empanelment fees recovered from venders as consideration for services provided by the auditorium and therefore taxable as business auxiliary services. The Tribunal in the earlier order agreed with chargeability but distinguished the tax liability issue from penal consequences, examining the circumstances surrounding non-payment. Ratio vs. Obiter: The confirmation of service tax liability is part of the adjudicative ratio in both the impugned orders and the earlier Tribunal decision; however, the present appeal did not re-litigate the core taxability question and proceeded on the basis that tax demand had been confirmed and paid. Conclusions: The Tribunal accepts the confirmed finding of service tax liability on empanelment fees for the period at issue and notes that the appellant has deposited the demand and interest. The taxability point is not disturbed in the present appeal. Issue 2 - Imposition of penalties under Sections 76, 77 & 78 Legal framework: Penalties under Sections 76-78 may be levied for failure to pay or declare tax; Section 80 (and judicially recognized principles of waiver) permits relief from penalties in appropriate circumstances. Mens rea and suppression are relevant to invoking extended limitation and penalty provisions. Precedent Treatment: The Tribunal's prior order (10.04.2017) concerning identical earlier show-cause notices found the facts warranted waiver of penalties and set aside penalties after applying Section 80 principles and relevant Tribunal authorities where government/defence bodies were found to lack malafide intent. The prior order relied on Tribunal decisions (e.g., municipal, telecom, tourism corporation, HUDCO) in which penalties were waived in similar circumstances. Interpretation and reasoning: The Tribunal examined the record and noted: (a) cooperation with the Department during audit and provision of all requested details; (b) characterization of the amounts as 'rebate' arising from a misinterpretation, not deliberate concealment; (c) absence of evidence of suppression or intent to evade; (d) voluntary and prompt payment of the confirmed demand and interest once appeals were exhausted; and (e) the appellant being a defence/government organisation, which weighed against inferring malafide intent. On these facts, the Tribunal concluded that imposition of penalties was not warranted. Ratio vs. Obiter: The holding that penalties should be set aside on these factual grounds is ratio for the present appeal (penalty issue). The discussion of comparative case law is supportive precedent and not merely obiter. Conclusions: Penalties under Sections 76, 77 & 78 are set aside. The Tribunal modifies the appellate order to delete the penalty component in light of cooperation, bona fide doubt on taxability, absence of mens rea, and prior Tribunal findings in identical matters. Issue 3 - Applicability of mens rea and extended limitation under Section 73(1) Legal framework: Invocation of extended limitation under Section 73(1) and imposition of penalty normally requires evidence of suppression or willful misstatement; mens rea (intent to evade) is a critical factor in attracting extended provisions and heavier penalties. Precedent Treatment: The prior Tribunal decision examined identical facts and found no evidence of suppression or malafide intention, declining to invoke extended limitation and recommending waiver of penalties. Interpretation and reasoning: The Tribunal assessed the evidence of cooperation, disclosure, and subsequent payment. It concluded that non-payment arose from a bona fide doubt and misinterpretation rather than intentional concealment. The absence of any record evidence of suppression precluded invoking Section 73(1) extended period or attributing mens rea. Ratio vs. Obiter: The finding of absence of mens rea and consequent inapplicability of extended limitation is ratio in relation to penalty and limitation issues; it underpins the order setting aside penalties. Conclusions: Extended limitation under Section 73(1) and mens rea-based penalties do not apply on the facts. The Tribunal refrains from imposing penalty and refuses to apply extended limitation. Issue 4 - Effect of prior identical Tribunal adjudications on present penalty assessment Legal framework: Consistency in adjudication and precedential value of earlier orders of the same Tribunal are relevant when identical issues and facts are presented. Precedent Treatment: The Tribunal relied on its prior order disposing of several earlier show-cause notices relating to the same assessee and the same subject matter, where penalties were set aside for analogous reasons and cited authorities where penalties were waived for government entities under bona fide doubt. Interpretation and reasoning: Given that earlier show-cause notices raising similar allegations were decided by the Tribunal finding no mens rea and waiving penalties, and given the present appellant deposited the confirmed dues and interest, the Tribunal found no reason to depart from its earlier conclusions. The earlier decision's factual findings and reasoning were applied to the present period. Ratio vs. Obiter: The application of the prior Tribunal's reasoning to set aside penalties here is ratio for the present decision. The reliance on prior case law is instructive and forms part of the basis for relief. Conclusions: Consistent with earlier Tribunal findings, the penalty imposed in the present period is set aside; the appellate order is modified accordingly and the appeal is partly allowed.