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PJ/CASE LAW/2015-16/2673

Whether the penalty under section 80 be waived if the bona-fide belief of assessee is proved?

Case: -KITEC INDUSTRIES INDIA LTD. versus COMMR. OF C. EX. & SERVICE TAX, VAPI

Citation:-2015 (38) S.T.R. 166 (Tri. –Ahmd.)

Brief facts:- The brief facts of the case were that When the stay petition was called out, after hearing both sides for sometime on the stay petition, it was found that the appeal itself could be disposed of at that juncture only, accordingly, they disposed of the stay petition and took up the appeal itself for disposal. The relevant facts that arose for consideration were the appellant during the period December, 2009 to November, 2012 had got some of his products tested abroad and paid for such testing charges in foreign exchange. The lower authorities were of the view that the appellant was liable to pay Service Tax as a recipient of services as enshrined in Section 66A of the Finance Act, 1994 and issued show cause notice demanding the Service Tax, interest thereof and also proposing to impose penalties. The said show cause notice was adjudicated and after following the due process of law, the demands were confirmed with interest and penalties were imposed.
The first appellate authority on an appeal filed before him against such an order, rejected the same after following the principles of natural justice.
 
Appellant’s contention:-Ld. Counsel submitted that the appellant had paid the entire Service Tax liability and the interest thereof and was seeking the setting aside of the penalties imposed only on the ground that Service Tax liability which was fastened upon the appellant is under the reverse charge mechanism and was eligible to avail as Cenvat credit, as the testing charges were for the products manufactured and cleared by them. He submitted that this Service Tax liability was not discharged due to erroneous interpretation but submitted that even if it was liable to be paid, the appellants were eligible to avail Cenvat credit.

Respondent’s contention:-Ld. Departmental Representative reiterated the findings of the lower authorities.

Reasoning of judgment:-After giving due consideration to the submissions made by both sides, on perusal of the records, it was found that the Service Tax liability was fastened on the appellant under the provisions of Section 66A of the Finance Act, 1994 which provided for discharge of Service Tax liability by the recipient of the services if the service provider was situated abroad.
In  view, the Service Tax liability which was fastened on the appellant along with the interest was correctly held to be paid by the appellant inasmuch as, during the material period such a provision does exist in form of Section 66A of the Finance Act, 1994. They did not find any reason to interfere in such an order which upheld the Service Tax liability and the interest thereof. The appeal filed by the appellant to that extent was rejected.
 
As regards the penalty imposed on the appellant, they found that during the material period, appellant could have being under the bona fide impression, as to since the services were rendered i.e. testing of the product was done abroad, the Service Tax liability on the appellant may not arise. In their view, it could be a view entertained by the appellant during the material period as the testing of the product was conducted abroad cannot be faulted with.
By invoking the provisions of Section 80 of the Finance Act, 1994, they held that the appellant had shown sufficient cause for setting aside the penalties imposed by the adjudicating authority and upheld by the first appellate authority. The penalties imposed on the appellant under the various sections of the Finance Act, 1994 were set aside and appeal to that extent was allowed.
Appeal was disposed as indicated hereinabove.

Decision:-appeal disposed off

Comment:- The analogy of this case is that when the assessee proves that he was in Bona-fide belief that he was not to pay service tax then the penalty in Section 80 could be waived.

{prepared by:- Prayushi Jain}

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