ST - working as DSA for Bank – based on advise of Consultant assessee failed to pay tax - fit case for condoning lapse & not imposing penalty by invoking s.80 of FA, 1994: CESTAT
By TIOL News Service
AHMEDABAD, MAR 18, 2013: THE appellant was providing services as Direct Sales Agents (DSA) on commission basis since October, 2004 to General Insurance Companies and ICICI Bank.
They had obtained Service Tax registration under the category of "BAS" in September, 2005 but did not pay Service Tax or file returns.
A case was booked and it was revealed that the appellant had earned commission of Rs.8,52,839/- during the period from October, 2004 to March, 2008 on which they have not discharged their service tax liability of Rs.98,459/-. The above fact was admitted by Shri Mayur Vikrambhai Daftary, proprietor of the assessee in his statement dated 11/02/2008.
SCN came to be issued on 08/04/2009 and in adjudication, the demand of ST of Rs.98,459/- and interest of Rs.16,965/- was confirmed and since the same was already paid they were appropriated. The adjudicating authority also imposed a penalty of Rs.24,615/- u/s 78 r/w s.76. A penalty of Rs.14,000/- u/s 77 of the FA, 1994 was also imposed and since the same was paid it was appropriated.
Their appeal before the Commissioner(A) came a cropper and so the DSA is in appeal before the CESTAT.
They remained absent but filed written submissions and requested that their appeal be disposed on merits.
The Bench observed -
"6. I have perused the records and considered the written submissions made by the appellant, it is seen that the appellant is not disputing the service tax liability. Appellant has discharged the Service Tax liability and interest thereof on 1st March, 2008 and 18th August, 2008 on being pointed out by the lower authority during the course of verification. I find that the show-cause notice was issued on 8/04/2009. On perusal of record, I find that the Proprietor, on being asked about non filing of returns in his statement recorded under Section 14 has stated:
"On being asked by you about non-filing of ST-3 returns, I have to state that I am providing taxable services under the category of "Business Auxiliary Service" and holding service tax registration of the same. It is a fact that I have not filed any ST-3 returns after obtaining Service Tax Registration, as I have to state that I was misguided by my consultant that ICICI Bank is liable to pay the service tax and accordingly I could not follow the procedure. On receipt of your letter F.No.RJT/BAS-817/S. TAX/2005-06 dated 31/01/2008 I came to know that I am liable to discharge tax liability for the same and to file return from time to time. There was no intention to avoid the payment of Service Tax and to file ST-3 Returns, but the same has occurred due to misunderstanding and ignorance of law".
7. It can be seen from the above reproduced para of statement, he was misguided by the Consultant as to that the ICICI Bank is liable to pay the tax. After coming to know about the tax liability, he has paid the entire liability of service tax along with interest, I find that this case is an appropriate case for condoning the lapse of not filing the return and not paying the service tax, but both the lower authorities have imposed penalties on the appellant for violation of rules. In my view, lower authorities should have invoked the provisions of Section 80 of the Finance Act, 1994 and should not have imposed any penalties on the appellant. I find that this Bench in the case of Ram Travels [2012] 19 taxmann.com 185 (Ahd.-CESTAT), has categorically held that ignorance of law is enough to set-aside penalty under Section 76, 77 & 78 of the Finance Act, 1994. I find that the ratio of the decision of the Tribunal will squarely cover the issue before me in this case. The appellant had given reasonable cause for non-imposition of penalty under Section 76 & 77.
8. Accordingly, invoking provisions of Section 80 of the Finance Act, 1994, I set-aside the penalties imposed by the lower authorities on the appellant. The impugned order is set-aside to the extent it upholds the imposition of penalties under Section 76 & 77 of the Finance Act, 1994…"
The appeal was disposed of.
In passing: Now…for the 14K refund…
(See 2013-TIOL-462-CESTAT-AHM)
