2009 (5) TMI 347 - AT - Service Tax

Penalty service tax paid belatedly - respondent Ex-servicemen Resettlement and Coordinate Cooperative Society rendered the services of security agency - we find that the respondents were having a bona fide belief that during the relevant period only a commercial concern was required to discharge the service tax liability. Inasmuch as the respondent is a co-operative society they were of the view that there was no liability cast on them. That belief was also based on the advice given to them by M/s. ONGC (service recipient) - This fact has been appreciated by the learned Commissioner (Appeals) and he has used his discretion to set aside the penalty. Moreover we find that the respondent is a cooperative society consisting of ex-servicemen. It is a fact that they had not paid the service tax on a bona fide belief and also the said tax amount was not collected from M/s. ONGC. Once M/s. ONGC cleared the amount they paid it. So we agree with the learned Commissioner (Appeals) that there was no wilful intention on their part to evade service tax. There is no infirmity in the order of the Commissioner. Therefore we uphold it and reject the Revenue s appeal

Summary

Issues:
1. Service tax liability of a cooperative society providing security services to M/s. ONGC.
2. Imposition of penalties under Section 76 of the Finance Act.
3. Legitimate understanding of the cooperative society regarding service tax liability.
4. Discharge of service tax liability by the cooperative society after a delay.
5. Commissioner's decision to set aside penalties imposed on the cooperative society and its President.

Analysis:
1. The case involved a cooperative society providing security services to M/s. ONGC, which did not discharge its service tax liability. The Revenue issued a show cause notice in 1999, leading to confirmation of service tax demand and imposition of penalties by the Original Authority.

2. Penalties were imposed under Section 76 of the Finance Act: Rs. 1,00,000 for non-payment of service tax and Rs. 5,000 on the President of the society. An additional order in 2003 confirmed an amount with penalties of Rs. 100 per day.

3. The Commissioner (Appeals) set aside the penalties based on the cooperative society's contentions. He noted the society's registration, legitimate understanding, and regular discharge of service tax liabilities post the issue. The Commissioner found no wilful intention to evade tax and set aside the penalties.

4. The Revenue contended that the society's belief of not being liable for service tax was incorrect, as they only paid after a delay and upon receiving payment from M/s. ONGC. The Revenue argued for setting aside the Commissioner's order based on the society's alleged wilful avoidance of tax.

5. The Appellate Tribunal upheld the Commissioner's decision, noting the society's bona fide belief, advice from M/s. ONGC, and the fact that the tax amount was paid once received from M/s. ONGC. The Tribunal agreed that there was no wilful intention to evade tax, supporting the Commissioner's decision to set aside penalties.

In conclusion, the Appellate Tribunal rejected the Revenue's appeal, upholding the Commissioner's decision to set aside penalties imposed on the cooperative society and its President, based on their legitimate understanding and lack of wilful intention to evade service tax.