2008 (7) TMI 295 - AT - Service Tax

Penalty on account of suppression of value - there was confusion in the mind of the assessee and the department was also not clear with regard to coverage of their activity under Authorised Service Station or Business Auxiliary Service - held that original adjudication order not imposing the penalty is a correct order - review order imposing penalty is not justified and the same is set aside by allowing the appeal

Summary

Issues: Jurisdiction to waive penalty for Business Auxiliary Service under Section 78 of the Finance Act.

Analysis:
1. The appeal stemmed from a review order imposing a penalty of Rs. 4,53,000 on the assessee for Business Auxiliary Service, as the original authority had no jurisdiction to waive the penalty. However, the Assistant Commissioner had given reasonable cause under Section 80 of the Finance Act to justify the waiver. The appellant argued that the original authority correctly exercised its power under Section 80, finding a reasonable cause for the waiver, and thus, the review order imposing the penalty was incorrect.

2. The Chartered Accountant representing the appellant referred to a previous judgment in the case of M/s. Majestic Mobikes Pvt. Ltd. & Others v. CCE, where penalties were set aside, emphasizing that penalties cannot be imposed if the Service tax and interest were paid before the show cause notice was issued. The judgment also highlighted the importance of demonstrating a reasonable cause and bona fide intentions in not immediately depositing the due amount. Another judgment cited was Kamal and Company v. CCE, where a waiver of pre-deposit was granted based on prima facie merit in the appellant's submissions regarding 'after sales service'.

3. The learned SDR contended that the Commissioner had valid reasons for imposing the penalty and argued against its discharge.

4. Upon careful consideration, the Bench found that a similar situation had been addressed in the case of M/s. Majestic Mobikes Pvt. Ltd. & Others v. CCE, where non-imposition of penalty by the Original Authority was deemed justified due to reasonable cause. In the current case, the appellant had doubts about the correct heading for paying Service tax, as did the department. Since the Service tax and interest were paid before the show cause notice, the original order not imposing the penalty was deemed correct. Consequently, the review order imposing the penalty was set aside, and the appeal was allowed.