2006 (7) TMI 20 - AT - Service Tax

Appeal allowed, penalty set aside for service tax transfer. Interest upheld under Section 75. Clarification on liability.

The appeal was allowed, setting aside the penalty imposed on the appellant for transferring service tax to the Department of Telecommunication based on ... Service Tax – BSNL got autonomous body in 2000. Procedure for payment of service tax has been changed. Instruction was issued on 18.12.2000. Therefore no interest is payable up to 18.12.2000 and shall be payable on or after 19.12.2000. Issues:Appeal against order upholding interest and penalty imposition on the appellant.Analysis:1. The appellant, a Secondary Switching Area (SSA) of BSNL, transferred service tax collected by book transfer to the Department of Telecommunication (DoT) based on a circular. However, they later deposited the amount after being pointed out, leading to a show cause notice for penalty and interest recovery under the Finance Act, 1994.2. The Commissioner (Appeal) reduced the penalty but upheld interest collection. The appellant argued that the penalty was unwarranted as they followed directions from their head office and never defaulted in transferring the amount to DoT, supported by a chart of transfer dates.3. The Departmental Representative contended that the penalty reduction was already lenient, and interest collection was mandated by Section 75 of the Finance Act. After considering both sides and records, it was found that confusion existed between the Department of Telecommunication and the appellant regarding service tax payment procedures during the relevant period.4. The Government's letter directed BSNL circles to pay service tax directly to DoT Cells, causing the appellant to transfer the tax to DoT through their head office. Despite the confusion, interest was held payable from the date mentioned in the letter till the discharge of the service tax liability, as per Section 75 of the Act.5. Regarding the penalty under Section 76, it was noted that the appellant acted under guidance from higher authorities, justifying invoking Section 80 for reasonable cause. Consequently, the penalty imposed on the appellant was set aside, and the appeal was allowed.6. The judgment, pronounced on 12.7.2006, clarified the confusion between the Department of Telecommunication and the appellant, leading to the appellant's liability for interest payment but setting aside the penalty due to reasonable cause.