Whether penalty can be imposed for non-payment of tax when there is bonafide belied on the part of asseessee?

PJ/CASE LAW/2015-16/2618

Case:-MAOSAJI CATERERS Versus COMMISSIONER OF CENTRAL EXCISE, RAIPUR-I

Citation:-2015 (38) S.T.R.69 (Tri.-Del.)

Brief facts:-The appellant was in appeal against the impugned order wherein Service Tax demand under the category of outdoor catering service had been confirmed against him and penalties under Sections 76, 77 and 78 of the Finance Act, 1994 had been imposed.

The brief facts of the case were that under the agreement dated 30-3-2005 the appellant engaged in providing canteen services at the premises of M/s. Lafarge India Pvt. Ltd. during the period May, 2005 to April 2006. As per the contract entered between the parties, the appellants were required to provide food or snack to their employees from time to time and were required to maintain certain standards of cleanliness etc. for that purpose. An investigation was conducted at the premises of M/s. Lafarge India Pvt. Ltd. and it was found that the appellant was providing outdoor catering service. Therefore, they were liable to pay Service Tax under the category of outdoor catering services as defined under Section 65(24) of Finance Act, 1994. In these set of facts, proceedings were initiated against the appellant and demand of Service Tax along with interest of various penalties under the Finance Act, 1994 was confirmed against the appellants.

Appellant’s contention:-The ld. Counsel for the appellant submitted that as Section 65(24) defining the caterer, the appellant was not a caterer at all. Therefore, he was not liable to pay Service Tax on their activity. He further submitted that the appellant was under a bona fide belief that the activity undertaken by him did not fall under the category of outdoor catering service. He also submitted that they had not collected the Service Tax and when the proceedings were initiated against them, they paid the entire amount of Service Tax which proved that the appellants were under bona fide belief that they were not liable to pay Service Tax. Therefore, they prayed that impugned order was to be set aside.

Respondent’s contention:-On the other hand, Shri ld. AR submitted that the activity undertaken by the appellant was clearly covered under the outdoor catering services and both the lower authorities had rightly demanded the Service Tax from the appellant and as the conduct of the appellant show that they had not taken the registration and were providing taxable services. In these circumstances, penalties had rightly been imposed on the appellant by the lower authorities. To support his contention, he relied on the decision in the case of Indian Coffee Workers Co-operative Society Ltd. v. CCE - 2014 (33) S.T.R. 266 (T)vide Final Order No. 57441/2013, dated 29-8-2013.

Reasoning of judgment:-after hearing both sides it was held thaton merits, the contention of the ld. Counsel for the appellants was that the appellant was not covered under the definition of caterer. The bench did not agree with the contention of the ld. Counsel. As the only contention was taken by the ld. Counsel that the catering facility should be availed for any purpose which should be linked with occasion, so he meant to say that there should be a special purpose for availing catering service. The bench did not agree with this proposition made by the ld. Counsel of the appellant. As the purpose of providing snacks and foods had clearly mentioned in the agreement entered into between the appellant and M/s. Lafarge India Pvt. Ltd. therefore, on merits they held that the appellants were liable to pay Service Tax under the category of Outdoor Catering service on the activity undertaken by them. The bench further found that as the appellant immediately paid Service Tax when investigation started against them. They were also convinced by the argument that they were under the bona fide belief that they were not liable to pay Service Tax. In these circumstances, the penalty under Section 78 of the Finance Act is set aside.

Decision: - appeal disposed off

Comment:-The gist of the case was that the assessee was actually unaware about his liability to pay tax and paid the tax as soon as the same was brought in his notice. Therefore he was rewarded with the waiver of penalty under section 78. It was held that there was bona fide belief of assessee, hence there is no need of imposition of penalty.

{prepared by:- Prayushi Jain}

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PJ/CASE LAW/2015-16/2618

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