When the service tax department has become very stringent in light of
additional power of arrest been given, this ruling should come handy for genuine
assessee, wherein they could not collect and pay service taxes due ignorance of
laws prevalent.
The Kolkata CESTAT bench has held that in case where assessee did not pay service tax on storage/handling of empty containers on reasonable belief that it was not liable to service tax i.e., assessee did not have any mala fide intention to avoid/evade Service Tax, penalties levied under section 76 were to be waived by virtue of section 80.
Section 80 of the Finance Act, 1994 – Penalty – Not to be imposed in certain cases – Assessee was registered with Department but was not paying service tax on storage and warehousing service in relation to empty containers – Demand against assessee was confirmed along with interest and penalties – Assessee contended that it was a government of India Enterprise regularly discharging service tax and could not pay service tax in respect of empty containers due to reasonable belief that it was not taxable – HELD : Assessee was paying Service Tax on handling and storage of loaded containers but due to reasonable belief, it could not pay Service Tax on empty containers – Assessee did not have any mala fide intention to avoid/evade Service Tax as recorded in adjudication order while setting aside penalty under section 78 – Accordingly, there was reasonable cause for failure to pay Service Tax on empty containers and penalty imposed under section 76 was to be set aside [Paras 7 & 8] [In favour of assessee]
Full ORDER
2. Applicant filed this application for waiver of pre-deposit of penalty of Rs. 1,25,420/- (Rupees One Lakh Twenty Five Thousand Four Hundred and Twenty only).
3. The contention of the applicant is that they have already paid the total Service Tax involved in this case along with interest.
4. After hearing both sides I find that appeal itself can be disposed of at this stage. With the consent of both the sides I proceed to decide the appeal itself. The appellants are having Service Tax registration for providing storage and warehousing service. For the period 2004-2005 to 2006-2007 they were paying Service Tax under storage and warehousing service. They have also undertaken storage and warehousing service in relation to empty containers. The department initiated the proceeding against them for not paying Service Tax on the service relating to handling of empty containers. Lower adjudicating authority confirmed the demand of Rs. 1,25,420/- (Rupees One Lakh Twenty Five Thousand Four Hundred and Twenty only) and imposed equal amount of penalty under Section 76 of Finance Act, 1994. The appellants challenged the same before Id. Commissioner (Appeals) and Id. Commissioner (Appeals) upheld the lower adjudicating authority’s order and dismissed the appeal filed by them. Hence the appeal.
5. The contention of the appellant is that they are Govt, of India Enterprise and they have been regularly discharging their liability under storage and warehousing service. However, due to reasonable belief that they are not required to pay Service Tax on handling of empty containers they could not pay Service Tax on the handling/storage of empty containers and they did not have any intention to avoid or evade Service Tax and their reasonable belief is covered under reasonable cause under Section 80 of Finance Act, 1994. The contention of the appellant is that the Service Tax on storage and warehousing was introduced in 2003 and lower adjudicating authority has recorded in the order that they did not have any mala fide intention. Therefore penalty imposed against them may be set aside.
6. The contention of Id. A.R. is that the appellant was having Service Tax registration under storage and warehousing service and they were knowing that they have to pay Service Tax. For non-payment of Service Tax for handling and storage is not falling under reasonable cause under Section 80 of Finance Act, 1994. They have quoted the wrong circular therefore there was no reasonable cause.
7. I have considered the submissions of both the sides and perused the record. I find that Service Tax on storage and warehousing service was introduced in the year 2003. It is not in dispute that they were paying Service Tax on handling and storage of loaded containers. However, due to reasonable belief they could not pay Service Tax on empty containers and they did not have any mala fide intention to avoid/evade Service Tax. Their contention is supported by the finding of Id. adjudicating authority in para 2 which reads as under :
“….However, no penalty should be imposed under Section 78 as I do not find that they had any mala fide intention to evade tax”.
8. Thus the appellant are able to show that there was reasonable cause for the failure to pay Service Tax on empty containers. Therefore the penalty imposed under Section 76 is set aside and appeal is allowed with consequential relief, if any, as per law: Appeal allowed. Stay petition also gets disposed of.
The Kolkata CESTAT bench has held that in case where assessee did not pay service tax on storage/handling of empty containers on reasonable belief that it was not liable to service tax i.e., assessee did not have any mala fide intention to avoid/evade Service Tax, penalties levied under section 76 were to be waived by virtue of section 80.
Section 80 of the Finance Act, 1994 – Penalty – Not to be imposed in certain cases – Assessee was registered with Department but was not paying service tax on storage and warehousing service in relation to empty containers – Demand against assessee was confirmed along with interest and penalties – Assessee contended that it was a government of India Enterprise regularly discharging service tax and could not pay service tax in respect of empty containers due to reasonable belief that it was not taxable – HELD : Assessee was paying Service Tax on handling and storage of loaded containers but due to reasonable belief, it could not pay Service Tax on empty containers – Assessee did not have any mala fide intention to avoid/evade Service Tax as recorded in adjudication order while setting aside penalty under section 78 – Accordingly, there was reasonable cause for failure to pay Service Tax on empty containers and penalty imposed under section 76 was to be set aside [Paras 7 & 8] [In favour of assessee]
Full ORDER
1. Heard both sides.
2. Applicant filed this application for waiver of pre-deposit of penalty of Rs. 1,25,420/- (Rupees One Lakh Twenty Five Thousand Four Hundred and Twenty only).
3. The contention of the applicant is that they have already paid the total Service Tax involved in this case along with interest.
4. After hearing both sides I find that appeal itself can be disposed of at this stage. With the consent of both the sides I proceed to decide the appeal itself. The appellants are having Service Tax registration for providing storage and warehousing service. For the period 2004-2005 to 2006-2007 they were paying Service Tax under storage and warehousing service. They have also undertaken storage and warehousing service in relation to empty containers. The department initiated the proceeding against them for not paying Service Tax on the service relating to handling of empty containers. Lower adjudicating authority confirmed the demand of Rs. 1,25,420/- (Rupees One Lakh Twenty Five Thousand Four Hundred and Twenty only) and imposed equal amount of penalty under Section 76 of Finance Act, 1994. The appellants challenged the same before Id. Commissioner (Appeals) and Id. Commissioner (Appeals) upheld the lower adjudicating authority’s order and dismissed the appeal filed by them. Hence the appeal.
5. The contention of the appellant is that they are Govt, of India Enterprise and they have been regularly discharging their liability under storage and warehousing service. However, due to reasonable belief that they are not required to pay Service Tax on handling of empty containers they could not pay Service Tax on the handling/storage of empty containers and they did not have any intention to avoid or evade Service Tax and their reasonable belief is covered under reasonable cause under Section 80 of Finance Act, 1994. The contention of the appellant is that the Service Tax on storage and warehousing was introduced in 2003 and lower adjudicating authority has recorded in the order that they did not have any mala fide intention. Therefore penalty imposed against them may be set aside.
6. The contention of Id. A.R. is that the appellant was having Service Tax registration under storage and warehousing service and they were knowing that they have to pay Service Tax. For non-payment of Service Tax for handling and storage is not falling under reasonable cause under Section 80 of Finance Act, 1994. They have quoted the wrong circular therefore there was no reasonable cause.
7. I have considered the submissions of both the sides and perused the record. I find that Service Tax on storage and warehousing service was introduced in the year 2003. It is not in dispute that they were paying Service Tax on handling and storage of loaded containers. However, due to reasonable belief they could not pay Service Tax on empty containers and they did not have any mala fide intention to avoid/evade Service Tax. Their contention is supported by the finding of Id. adjudicating authority in para 2 which reads as under :
“….However, no penalty should be imposed under Section 78 as I do not find that they had any mala fide intention to evade tax”.
8. Thus the appellant are able to show that there was reasonable cause for the failure to pay Service Tax on empty containers. Therefore the penalty imposed under Section 76 is set aside and appeal is allowed with consequential relief, if any, as per law: Appeal allowed. Stay petition also gets disposed of.
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