Bonafide Non-Payment of Service Tax does not attract Penalty u/s 73(1): CESTAT [Read Order]

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), New Delhi, has recently, in an appeal filed before it, held that bonafide non-payment of service tax does not attract penalty.

The aforesaid observation was made by the Tribunal when appeals were filed before it by appellants who were service providers, on commission basis, of M/s. Adarsh Credit Cooperative Society Ltd. (hereinafter called as M/s. ACCSL).

The facts of the case were that the appellants were receiving commission from M/s. Adarsh Credit Co-operative Society Ltd., for providing various services including that of ‘Consultants’. Upon a specific intelligence being gathered by the Officers of DGGI, Jaipur Zonal Unit that the appellants were receiving commission from M/s. ACCSL in lieu of providing “Business Auxiliary Services” to M/s. ACCSL, it was found that the service tax was not being paid by the appellants on the amount of the said commission received.

Accordingly, the appellants were enquired vide letters dated 01.02.2018 in Appeal No. ST/51585/2019 and Appeal Nos. ST/51021/2021, ST/51022/2021, ST/51023/2021 and ST/51024/2021, dated 21.06.2018, wherein the appellants vide their respective separate replies had responded to the query of the department but after several repeated reminders to them.

From their responses and from the scrutiny of the documents including Form 26AS and ITRs, as were provided by the appellants/service providers, it was so observed by the department that the appellants have received respective commission from M/s. ACCSL for the respective periods for providing ‘Business Auxiliary Services’, and further that though services are taxable post 01.07.2012  the appellants have not discharged their service tax liability even since then.

Accordingly, the appellants were served with show cause notices proposing the recovery of respective amount of service tax along with interest and appropriate penalties, wherein the said proposal had also been confirmed by both the adjudicating authorities except for some benefit of exemption for a particular period,vide the orders in each of these appeals. And it is by being aggrieved by this that the appellants have preferred the instant appeal before the Tribunal.

It was submitted by the Counsel for the appellants that there was much of confusion about the nature of the services being provided by the appellants as far as the taxability thereof was confirmed, while on the other hand, rebutting these submissions, the DR on behalf on the Revenue impressed upon that the appellants had never taken the service tax registration despite the ‘Business Auxiliary Services’ having been made taxable w.e.f. 01.07.2012, for the sole reason that these services are not covered under negative list of Section 66B of Service Tax Act (Finance Act, 2012).

However, listening to the opposing contentions of both the sides and perusing the materials available on record, DR. Rachna Gupta, the Judicial Member of the Tribunal observed:

“From the entire discussion, I hold that since there was the scope and belief with the appellants for entertaining the doubt about no liability of theirs to pay the service tax that the application of Section 73(1) of the Finance Act, 1994, the proviso thereof gets ruled out and resultantly, the extended period of limitation is held to have wrongly invoked by the department.”

“ The adjudicating authorities below are thus, held to have wrongly confirmed the demand for the extended period of limitation.”, allowing the assessees’ appeals the Tribunal concluded.

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