By TIOL News Service

NEW DELHI, AUG 21, 2014: INVOKING the extended period of limitation, a SCN was issued to the appellant demanding Service Tax of Rs.1 ,59,068 /-. The ground - that the appellant had acted as a marketing agent in respect of loan products of ICICI Bank Limited and thus provided Business Auxiliary Service falling within the ambit of Section 65(19) of the FA, 1994 .

The Assistant Commissioner while confirming the demand exhibited a soft corner towards the appellant - he mentioned the following in his order - looking at the quantum of commission earned by the appellant and amount confirmed against it and in the recognition of the fact that the appellant is a small service provider having a small liability I do not hope that the appellant is well equipped with the Rules & Regulations of the Finance Act, 1994; that several similarly placed service provides had expressed unawareness of provisions of the Act; and that on going through in other similar cases; the authority is satisfied that there was a reasonable cause for the appellant not depositing service tax in time.

Nonetheless, while dropping the penalty u/s 77 of the FA, 1994, he imposed a penalty u/s 78 of the Act.

Against this portion of the order, the appellant went in appeal before the Commissioner(A).

And the Commissioner (A) is a learned man - he said - a doubt on the part of the appellant regarding its taxability to service tax is not relevant; in case the appellant has a doubt about taxability of the service the appellant should have approached the department for clarification but failed to do so and therefore the appellant had deliberately avoided payment of service tax, suppressed the fact of   non-payment   of service tax and therefore imposition of penalty under Section 78 is valid.

The appellant is, therefore, before the CESTAT.

At the outset the Bench observed - the contradictions in the primary order are compounded by the   incoherences   in the appellate order as well.

Having said so, the Bench further mentioned -

The order of the appellate authority is equally misconceived as there is no provision for an assessee to seek advisory opinion from departmental officers nor is any statutory provision brought to our notice which   authorises   departmental officers to provide advice on interpretation of provisions of the Act; assessment of transactional facts qua the provisions of the Finance Act, 1994 and provide guidance on taxability or otherwise. The perception of the learned appellate Commissioner that every departmental officer is a sui generis advance ruling authority is a misconception that has no legislative basis.

The CESTAT held -

"…, since the primary authority had clearly recorded the finding that the appellant was under bonafide misconception as to the liability to tax and had dropped penalty under Section 77 for that reason, that finding equally covers the case in   favour   of the assessee both with regard to imposition of penalty under Section 78 as well initiation of proceedings by invoking the extended period of limitation. Revenue has not preferred any appeal against the order of the primary authority against dropping of penalty under Section 77 of the Act."

In fine, the order of the appellate Commissioner was quashed and the appeal was allowed.

(See 2014-TIOL-1555-CESTAT-DEL)