Service tax exemption denied for missing certificates, but penalty set aside as the lapse was treated as bona fide mistake.

Service tax exemption under Notification No. 16/2002-ST was denied because supporting certificates were not produced, even though the services to international organisations were accepted by the lower authorities. The lapse in producing the certificates was treated as a bona fide mistake, and the assessee did not contest the short tax demand. The service tax demand was therefore sustained, but penalty was set aside.

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Issues: Whether penalty was sustainable when the service tax demand was maintained but the assessee's entitlement to exemption under Notification No. 16/2002-ST was denied only because supporting certificates were not produced.

Analysis: The assessee had rendered services to international organisations, a fact accepted by the lower authorities. The exemption benefit was denied only on the failure to produce the relevant certificates. In the circumstances, the lapse in producing the certificates was treated as a bona fide mistake, and the short tax demand was not contested.

Conclusion: The service tax demand was sustained, but the penalty was set aside.

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