Case Law Details

Case Name : Commissioner of Central Excise Vs G V Associates (CESTAT Chennai)
Appeal Number : Appeal No. ST/620/2010
Date of Judgement/Order : 14/02/2011
Related Assessment Year :
Courts : All CESTAT (655) CESTAT Chennai (82)

With regard to imposition of penalty under Section 75A, 76, 77 and 78 of the Act, the appellants argue that non payment of service tax on the Business Auxiliary Service due to the bonafide belief that the taxable event is existing only in the business transaction between IHFCL and the borrowers and the service rendered by them to IHFCL is secondary in nature. They are not aware of the fact that the service of loan processor rendered by them to IHFCL and the service of sanctioning of loan rendered by IHFCL to borrowers are two separate taxable services. As such the appellants have not also raised any bills against IHFCL and the service tax incidence is also not collected from IHFCL.

It is also seen that once the lapse on the part of the appellants is brought to their notice, they have readily paid the service tax along with part payment of interest for belated payment and the same has been appropriated towards the demand and interest confirmed. It is seen that the above said error in understanding the provisions relating to impugned taxable services is a reasonable cause for failure of provisions contained under Section 76, 77 and 78 of the Act.”

There is no evidence adduced to contend that the respondents have deliberately failed to pay service tax. There is no evidence brought on record to contradict the above factual finding recorded by the Commissioner (Appeals).

IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH, CHENNAI

Appeal No. ST/620/2010

Arising out of Order-in-Appeal No.235/2010 Dated: 24.6.2010
Passed by the Commissioner of Central Excise (Appeals), Madurai

Date of Decision: 14.02.2011

COMMISSIONER OF CENTRAL EXCISE, TIRUNELVELI

Vs

G V ASSOCIATES

Appellant Rep by: Shri K Balasubramanian, DR
Respondent Rep by: None

CORAM: M Veeraiyan, Member (T)

Service Tax – Business Auxiliary Service – Penalty – Section 80 – Demand of Service Tax upheld invoking extended period. Penalties set aside under Section 80. HELD – No evidence adduced that the assessee deliberately failed to pay service tax. Setting aside penalty under Section 80 justified. (Para 5.3)

Appeal dismissed

FINAL ORDER NO.314/2011

Per: M Veeraiyan:

This is an appeal by the department against the order of the Commissioner (Appeals) No.235/2010 dt. 24.6.2010.

2. Heard the learned DR. None appears for the respondent in spite of notice.

3. The respondent functions as loan processor between ICICI bank, Home Finance Co. Ltd. and the borrowers. The bank collects processing fee from the borrowers. Out of the amount so collected as processing fee, some portion is paid to the respondent as commission for their services. The department was of the view that the respondents rendered “Business Auxiliary Services” to the bank and, therefore, service tax was payable on the commission fee received by them from the bank. On being pointed out by the department, the respondent paid the service tax along with interest before April 2007. Show-cause notice dt. 9.10.2007 was issued proposing confirmation of the service tax paid by them and proposing penalties under various Sections. Original authority vide order date 26.12.08, confirmed demand of service tax of Rs.1,56,340/- and imposed penalties under Sections 75A, 76, 77 & 78 of the Finance Act, 1994. Commissioner (Appeals), while upholding the demand of service tax along with interest, set aside the penalties invoking the provisions of Section 80 of the Finance Act.

4. Ld. DR, reiterating the grounds of appeal, submits that the Commissioner (Appeals) has upheld the entire demand which was confirmed invoking the extended period of limitation. Therefore, his setting aside the penalty is contradictory to the decision in upholding the demand under extended period of limitation.

5.1. I have carefully considered the submissions and perused the records. The authorized signatory of the respondent during investigation has submitted that the commission received by them was out of the fee collected for processing of the loan by the bank. They were under the impression that since service tax was payable on the whole amount of processing fee by the Bank, no service tax was liable to be paid by them. However, on being pointed out by the department, they have promptly paid the service tax along with interest before issue of show-cause notice. The submission of ld. DR that the Commissioner (Appeals) has upheld the demand which was confirmed invoking the extended period, though is factually correct, no submissions have been made on behalf of the respondent before the Commissioner (Appeals) about the applicability or otherwise of the extended period of limitation. The Commissioner (Appeals) taking note of the fact that the entire service tax stands paid before issue of show-cause notice upheld the demand without going into the limitation aspect. However, taking the facts and circumstances of the case, which involved receipt of portion of the processing fee by the respondent from the bank and the bank having paid the service tax on the entire amount he waived penalties imposed by the original authority under various Sections.

5.2 In the peculiar facts and circumstances of the case, the finding of the Commissioner (Appeals) that there was sufficient cause for invoking the provisions of Section 80 cannot be faulted. In this regard, relevant portion of his findings are reproduced below :-

“However with regard to imposition of penalty under Section 75A, 76, 77 and 78 of the Act, the appellants argue that non payment of service tax on the Business Auxiliary Service due to the bonafide belief that the taxable event is existing only in the business transaction between IHFCL and the borrowers and the service rendered by them to IHFCL is secondary in nature. They are not aware of the fact that the service of loan processor rendered by them to IHFCL and the service of sanctioning of loan rendered by IHFCL to borrowers are two separate taxable services. As such the appellants have not also raised any bills against IHFCL and the service tax incidence is also not collected from IHFCL. It is also seen that once the lapse on the part of the appellants is brought to their notice, they have readily paid the service tax along with part payment of interest for belated payment and the same has been appropriated towards the demand and interest confirmed. It is seen that the above said error in understanding the provisions relating to impugned taxable services is a reasonable cause for failure of provisions contained under Section 76, 77 and 78 of the Act.”

5.3 There is no evidence adduced to contend that the respondents have deliberately failed to pay service tax. There is no evidence brought on record to contradict the above factual finding recorded by the Commissioner (Appeals).

6. In view of the above, there is no merit in the appeal by the department and the same is rejected.

(Dictated and pronounced in open court)

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