2009 (3) TMI 411 - AT - Service Tax

Appellate tribunal overturns penalties under Finance Act, 1994, emphasizing compliance with Board Circular

The appellate tribunal ruled in favor of the appellant, setting aside the reviewing authority's decision to impose penalties under Sections 76, 77, and 78 ... Service Tax paid with interest before issue of SCN:- Penalty- The appellant are engaged in the activity of providing taxable services under the category of ‘Man-dap Keeper Services’, ‘Health & Fitness Services and ‘Convention Services’. Service Tax paid with interest before issue of Show cause Notice. In this case Tri-(Bang.) held that the impugned review order is not sustainable and is liable to be set aside and no penalty can be imposed. Issues:1. Whether the appellant contravened the provisions of Sections 68 and 70 of the Finance Act, 1994 by suppressing the value of taxable services.2. Whether the Assistant Commissioner's Order-in-Original dated 26-4-2006 was legal and proper.3. Whether the reviewing authority correctly imposed penalties under Sections 76, 77, and 78 of the Finance Act, 1994.4. Whether the Board's Circular dated 3-10-2007 supports the appellant's contention regarding the discharge of Service Tax liability before the show cause notice.Analysis:1. The appellant was engaged in providing taxable services and was issued a show cause notice for contravention of Finance Act provisions. The Adjudicating Authority confirmed the Service Tax demand under Section 73(1), imposed a penalty under Section 75A, and dropped penalties under Sections 76, 77, and 78. However, the reviewing authority issued a new show cause notice for penalties under Sections 76, 77, and 78. The reviewing authority imposed penalties, which were contested by the appellant based on a bona fide belief and the Board's Circular dated 3-10-2007. The reviewing authority upheld the penalties, leading to the appeal.2. The reviewing authority imposed penalties under Sections 76, 77, and 78, contrary to the Adjudicating Authority's decision. The appellant argued that they discharged the Service Tax liability before the show cause notice was issued, citing Section 73(3) of the Finance Act, 1994. The reviewing authority disagreed, stating that penalties were justified due to the appellant's registration for taxable services. The appellate tribunal noted discrepancies in the reviewing authority's decision and the Board's Circular dated 3-10-2007, which clarified the conclusion of proceedings upon payment of Service Tax and interest.3. The reviewing authority's order was found to be unsustainable as it contradicted the Board's Circular, which mandated the conclusion of all proceedings upon payment of Service Tax and interest. The appellate tribunal set aside the reviewing authority's decision and allowed the appeal, emphasizing that lower authorities must adhere to the Board's instructions. The appellant's contention regarding the discharge of Service Tax liability before the show cause notice was supported by the Board's Circular, leading to the decision in their favor.4. In conclusion, the appellate tribunal ruled in favor of the appellant, setting aside the reviewing authority's decision to impose penalties under Sections 76, 77, and 78. The tribunal emphasized the importance of following the Board's Circular and concluded that the appellant's discharge of Service Tax liability before the show cause notice was in line with the legal provisions, warranting the appeal's allowance with consequential relief.