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Indusland Media & Communication Ltd V/S Commissioner of Service Tax, Bangalore Service Tax- I

    ST/201/2007-DB (Arising out of Order-in-Appeal No. 17/2007 dated 20/02/2007 passed by the Commissioner of Service Tax, Bangalore) and Final Order No. 20562/2017

    Decided On, 27 April 2017

    At, Custom Excise and Gold Control Appellate Tribunal South Zonal Bench Bangalore

    By, THE HONORABLE JUSTICE: S.S. GARG
    By, MEMBER AND THE HONORABLE JUSTICE: V. PADMANABHAN
    By, MEMBER

    For Petitioner: B.V. Kumar Law Associates And For Respondents: Ezhilmathi, AR



Judgment Text


1. The appellant is against the Order-in-Original No. 17/2007 dated 20.2.2007 passed by the Commissioner of Service Tax, Bangalore. The appellant is a service provider under the taxable category of advertising, broadcasting, cable operator and multisystem operator services. On the basis of the intelligence that assessee did not pay correct service tax due to the Government, the Department carried out investigation against them. Upon conclusion of the investigations and issue of show-cause notice, the impugned order was passed demanding service tax amounting to Rs. 46,29,386/- along with interest. Penalties were also imposed under Section 76, 77 and 78 of the Finance Act, 1994. The adjudicating authority also appropriated the service tax already paid during investigation amounting to Rs. 40,98,487/- towards the confirmed service tax. Aggrieved by the impugned order, present appeal has been filed.

2. With the above background, we heard Shri B.V. Kumar, learned advocate for the appellant as well as Dr. Ezhilmathi, AR representing Revenue.

3. The learned counsel for the appellant submitted on behalf of the appellant that in the present appeal, only the imposition of penalty is challenged. The entire service tax amount demanded has already been paid by the appellant along with the interest payable thereon. In the light of the above, he submitted that there was no mala fide intention to evade service tax in the present case, hence the penalties imposed upon them may be waived in terms of Section 80 of the Finance Act, 1994. In this connection, they relied upon following case laws:

i. CCE & ST, LTU, Bangalore vs. Addecco Flexione Workforce Solutions Ltd : 2012 (26) STR 3 (Kar.)

ii. CST, Bangalore vs. Fruition Informatics (P) Ltd., Bangalore : 2012 (26) STR 519 (Kar.)

iii. CCE, Mangalore vs. Nisa Industrial Services (P) Ltd., Bangalore: 2011 (24) STR 644 (Kar.)

iv. CST, Bangalore vs. Motor World : 2012 (27) STR 225 (Kar.)

v. CCE, Pune-III vs. Sinhagad Technical Education Society : 2016 (41) STR 283 (Tri.-Mum.)

vi. Indian Hotels Ltd. vs. CST, Mumbai : 2016 (42) STR 927 (Tri.-Mum.)

4. The learned AR supported the impugned order.

5. In the present appeal, the appellant has not challenged the liability to payment of service tax. It is also on record that full service tax dues have already been paid by the appellant along with applicable interest thereon. To this effect, they produced the challans evidencing payment of such differential service tax and interest. It has been submitted that there was no mala fide intention to evade payment of service tax in the present case. This intention is evident from the fact that the appellant has not recovered the service tax from the service receivers. In spite of that, they have come forward to pay the full service tax dues along with applicable interest thereon. In this connection, we have gone through the case laws relied upon by the appellant. In the case of Fruition Informatics (P) Ltd. (supra), the Hon'ble Karnataka High Court has held as follows:

6. The material on record would clearly show that there was delay in payment of service tax and it is not disputed that the service tax and the interest have been deposited belatedly but the penalty amount was not deposited. The explanation offered by the respondent is that there was no intention to avoid payment of service tax and infact for the period from September, 2004 February 2005 the service tax has been deduct and further in view of the information given by the NIIT of which the respondent is a franchise claiming that they have made out a ground claiming exemption the said explanation has been accepted by the appellate authority and confirmed by the appellate authority in exercise of the powers under Section 80 of the Act for waiver of penalty imposed under Section 76 of the Act. Having regard to the said reasoning assigned by the appellate authority and the Tribunal we hold that the concurrent finding of fact arrived at by the first appellate authority and the Tribunal that a ground is made out for waiving of the penalty 80 of the Act is justified and does not suffer from any perversity or arbitrariness so as to call for interference. Accordingly, we answer the substantial questions of law against the Revenue and hold that the appeal is devoid of merits and pass the following order:

The appeal is dismissed.

5.1 The Hon'ble Karnataka High Court in the case of CST, Bangalore vs. Motor World (supra) has also taken a similar view.

13. Therefore, given the language of Section 80 of the Act, which confers discretion on the Service tax authorities not to impose penalty if there is reasonable cause in given case, the imposition of penalty under Sections 76, 77 and 78 is not automatic. The existence of grounds/ingredients postulated in the said provisions is a condition precedent for attracting penalty. Therefore, first, we have to find out whether in the facts of a given case whether those ingredients exist. Once it is held that those ingredients exist and the provisions are attracted, then if the language used in the said provisions do not leave any discretion in authority in the matter of imposition of penalty, penalty is to be imposed in terms of the said provision. However, if any discretion is left, then the said quasi-judicial discretion is to be exercised reasonably. Before levying penalty, the authority is required to find out whether there was any failure referred to in the concerned provision and the same was without a reasonable cause. The initial burden is on the assessee to shown that there existed reasonable cause, which was the reason for the failure referred to in the concerned provision. Thereafter the authority has to consider the explanation offered by the assessee for failure and whether it constitutes a reasonable cause. Reasonable cause means an honest belief founded upon reasonable grounds, of the existence of a state of circumstances, which assuming them to be true, would reasonably lead any ordinarily prudent and cautions man, to come to the conclusion that the same was the right thing to do. Only if it found to be frivolous, without substance or foundation, the question of imposing penalty would arise.
5.2 Section 80 of the Finance Act, 1994, as it stood at the relevant time is reproduced below for ready reference.

Section 80. Penalty not to be imposed in certain cases. - Notwithstanding anything contained in the provisions of Section 76, Section 77, section 78 or section 79, no penalty shall be imposable on the assessee for any failure referred to in the said provisions if the assessee proves that there was reasonable cause for the said failure.

5.3 The reason cited by the appellant for non-payment of service tax at the relevant time is ignorance of the provisions of service tax liability. They have also claimed that due to misunderstanding, they have neither collected a

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ny service tax on the various service tax income nor paid the service tax to the Government. This fact clearly establishes the fact that the appellants had no mala fide intention to evade payment of service tax. It is also on record that as a consequence of the impugned order, the full service tax dues and interest stands paid. 5.4 In the facts and circumstances of present case, we are of the view that this is a fit case to invoke the provisions of Section 80 and waive the penalties imposed on the appellant under Section 76, 77 and 78. We order accordingly. 6. In view of the above discussions, the payment of service tax with interest is upheld, however, the penalties imposed are waived under Section 80. Appeal is disposed of in the above terms.
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