Whether the penalty can be imposed when ST not paid due to some confusion?

PJ/Case Laws/2012-13/1257

Case:- City Union Bank versus Commissioner of Central Excise, Trichy

Citation:- 2011 (27) S. T. R. 25 (Tri.-Chennai)

Brief Facts:- Appellant is engaged in the business of banking & Finance services and provides services of loan to farmers who have bought tractors from M/s TAFE and this loan amount is paid to seller but the appellant have retained some amount being a payment by M/s TAFE and Commissioner said that, the tax was not paid on account of confusion regarding the tax liability.

Appellant Contention’s:- The appellant pleaded that payment of service tax along with interest was delayed due to some confusion regarding their liability to pay service tax and as soon as they became aware of their liability, the same was discharged. Therefore, penalty should not be imposed on them as there was no suppression of facts by them.

Respondent Contention’s:-The Respondent has drawn attention to the findings recorded from the order passed by the jurisdictional Commissioner.

Reasoning of Judgement:- The facts of the case are not in dispute because the appellant has advanced loan to farmers who have bought tractors from M/s. TAFE and the amount has been paid to M/s. TAFE against such purchase. The dispute is in relation to some amount they have received from M/s. TAFE by way of retention while paying the loan amount towards purchase of the tractor. But, the Appellants have subsequently paid the tax amount on the portion retained along with interest. The jurisdictional Commissioner while reviewing the original order has reversed the decision and has imposed a penalty. The learned JCDR has drawn attention to the findings recorded from paragraphs 19 onwards from the order passed by the jurisdictional Commissioner. However, there is no satisfactory reason given therein to reverse the finding of the original authority in regard to extending the benefit under Section 80 to the appellants. There is also no finding of any suppression, fraud etc. and the fact that the appellants have retained some amount out of the loan disbursed to M/s. TAFE does not alter the character of the amount being a payment by M/s. TAFE. Moreover, this is the first instance, where the tax was not paid on account of the confusion regarding the tax liability. Considering the same, they are of the view that the order of the original authority required no interference and hence the impugned Order-in-Revision is set aside and the original authority's order is restored allowing the appeal.

Decision:- Appeal Allowed.

Comment:- When there is confusion on applicability of service tax, hence no penalty can be imposed on service provider when he has paid the tax along with interest.

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PJ/Case Laws/2012-13/1257

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