ASCENT COMMUNICATION Vs. COMMR. OF SERVICE TAX, AHMEDABAD

JUDGEMENT

(1.) THE appellant entered into an agreement with M/s. Fascal Ltd., Ahmedabad to market their products as distributor. From July 2003, business auxiliary services were brought under service tax net and the department has taken a view that the service provided by the appellants falls under the category of business auxiliary service. The appellant obtained registration as a service tax assessee on 3 -9 -04 and paid the service tax in October 2004 for the period from July 2003 onwards. Subsequently statement of the proprietor was recorded, further investigation was conducted and show cause notice was issued on 3 -3 -05. The proceedings have culminated in confirmation of demand of service tax with interest and penalties under Sections 76, 77 and 78 of Finance Act, 1994.

(2.) THE learned advocate on behalf of the appellants submitted that appellants as soon as they came to know that they were liable, obtained registration and the very next month paid the service tax amount also. He fairly admitted that interest was paid later. It is his contention that the service was brought into service tax net for the first time in July 2003 and appellant being a proprietorship concern was not aware of the introduction of service tax and his liability under the category of business auxiliary service. Even though it has been stated that the department received the details of services provided on 10 -9 -04 from the service receiver, the fact that the service tax registration was obtained on 3 -9 -04 reflects the bonafidies of the appellant and also shows that appellant had no intention to evade any tax. Under these circumstances he submits that a lenient view as contemplated under Section 80 of Finance Act, 1994 may be taken and penalties under various sections may be waived since the service tax liability and the interest are not being disputed.

(3.) LEARNED DR on the other hand submits that the appellants paid the service tax because department has started the investigation and he submits the penalty under Section 78 of Finance Act, 1994 is mandatory. Even if it is assumed for provisions of Section 73 would apply, in this case since no returns were filed and registration was obtained much later, appellant would be eligible for relief under the provisions of Section 73 only if they have deposited Service tax, interest and penalty to the extent of 25% of the service tax. Since the appellant paid the service tax only after investigation started, a lenient view under Section 80 is not called for.