Penalty

CESTAT, Kolkata Bench

Commissioner of Service Tax, Kolkata-I

v.

Peekay & Co.

D. N. Panda, Judicial Member

Order No. A-331/Kol/07

Service Tax Appeal No. STSM - 68 of 2005

March 19, 2007

Section 80, read with sections 76 and 77 of the Finance Act, 1994 - Penalty - Not to be imposed in certain cases - Service tax was demanded from assessee and penalty was imposed upon it under section 76 and 77 - Assessee contended that matter regarding levy of service tax was in debate before various forums being a new concept in economy but as soon as it came to understand that it had to discharge its liability it had done so - Whether since delay in discharge of tax liability was neither deliberate nor willful or for knowable breach of law, penalty imposed upon assessee was to be waived - Held, yes [Paras 4 and 6]

FACTS

The adjudicating authority demanded service tax from the assessee and imposed penalty upon it under sections 76 and 77. On appeal, the assessee contended that levy of service tax was totally new and matter was in debate before various forum being a new concept in the economy and that as soon as it was guided by department’s public relation announcements, it filed returns and discharged its tax liability. The lower appellate authority waived the penalty imposed under sections 76 and 77.

On revenues’ appeal:

HELD

There was no difference of opinion about realization of levy from the assessee in view of incidence of the levy by specific letters of law. But discharge of tax liability was delayed which appeared to be neither deliberate nor willful or for knowable breach of law. The levy was at the initial stage and subject to Judicial review by various High Court. It was certainly a matter of confusion by taxpayers on various aspects of law at the infancy stage of enactment. It appeared that as soon as the assessee came to understand that it had to discharge his liability, it had done so. But belatedly. The assessee was guided by public relation announcements to the effect that if service tax with interest was paid within 30-11-2004 no penalty was leviable. Usually promise by the department, acts, as a promissory estoppel and levy of penalty would be deterrent. [Para 4]

It should be appreciated that section 80 exonerates penalty, if there is reasonable cause. The reason cited by the lower appellate authority appeared to be appealable reason and did not call for imposition of penalty. [Para 5]

In the result, the appeal was to be dismissed. [Para 7]