Case Law Details
If there is a bonafide mistake in calculation of service tax and same is made good by the Assessee, then penalty can not be imposed U/s. 75 and 78
Bajaj Travels Ltd Vs. Commissioner of Service Tax (Delhi HC)- The appellant submitted a detailed written reply dated 17th November, 2005. The defence was that it was paying service tax as per its bona fide understanding that the service tax was to be paid on the commission retained by the appellant. It was pleaded that the matter of calculation was not clear to it. Therefore, it had been filing its service tax returns on the basis of the commission retained by it and the correct method of computing the service tax was pointed out by the visiting team of the department. Therefore, the allegation of suppression, mis-statement were wrongly attributed to it. The learned Senior Counsel for the appellant also referred to series of orders passed by the various Benches of CESTAT where such penalties were set aside holding that when the service tax/short-service tax was paid before the show cause notice, it was a bona fide error.
The appellant cannot contend that once penalty is imposed under section 78, there should not have been any penalty under Section 76 of the Finance Act. The aforesaid amendment to Section 78 by Finance Act, 2008 shall operate prospectively.
The appellant has been able to prove its bona fides. Explanation of the appellant for short-payment was, as already pointed out above, that it was paying the service tax as per its bona fide understanding that it was required to pay the same on the commission retained by it and that the method of calculation was not clear to the appellant. This explanation gains momentum from the conduct depicted by the appellant after the visiting team of the Department had pointed out the correct method of computing the service tax. The said team of the Department visited the office of the appellant on 5th September, 2005 and pointed out the irregularity committed by the appellant. Once this mistake was realised, without even waiting for the show cause notice, which was issued on 17th October, 2005, short-fall was made good on 6th September, 2005 i.e. on the very next day after the search. Thus not only the entire tax was paid within two days, so much so, even the interest on the delayed payment was made good. This has further to be seen under the surrounding circumstances prevailing at that time. The service tax was a new tax imposed on the Air Travel Agent Services. There were many misgivings and confusion which led to committal of defaults by many such persons. In fact, the Department itself issued Circular accepting the fact that there was confusion and on that basis penalties in all such cases were waived in respect of those who had paid the service tax in response of the said Scheme. The learned Senior Counsel for the appellant also referred to series of orders passed by the various Benches of CESTAT where such penalties were set aside holding that when the service tax/short-service tax was paid before the show cause notice, it was a bona fide error.
It was not a case of imposition of penalty upon the appellant. penalties imposed upon the appellant under Section 76 and 78 of the Finance Act are hereby set aside.
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