COMMISSIONER OF SERVICE TAX, KOLKATA Vs. GUJRAL DISTRIBUTORS

JUDGEMENT

(1.) THIS is an appeal filed by the Revenue against the order -in -appeal No. 35/ST/KOL/2011, dated 25 -1 -2011.

(2.) BRIEFLY stated facts of the case are that the respondent are providing the service of Rent -A -Cab scheme to another operator of rent -a -cab during the period 2002 -03 to 2005 -06. They did not discharge service tax under the bona fide belief that Service Tax is not applicable to them as they were providing services of rent -a -cab operator to another rent -a -cab operator and not to clients directly as per Circular of C.B.E. and C. bearing F.No. B 43/7/97 -TRU, dated 11 -7 -1997. During the course of audit of their records, on being asked, they could not produce evidence that the rent -a -cab operator to whom they were providing service, had paid the service tax during the said period. Consequently, on the objection of the audit, they paid the service tax for the said period. The interest on the said service tax, however was paid over a period of time but before completion of adjudication proceeding. Subsequently, they were issued with a show cause notice on 17th October, 2007 proposing penalty and appropriation of the service tax amount already paid. The Ld. Adjudicating authority confirmed and appropriated service tax amount, and imposed a penalty of Rs. 2,78,754/ - under Section 78 of the Finance Act, 1994 even though the service tax amount involved in the case was Rs. 11,11,853/ - and education cess Rs. 3,180/ -. Aggrieved, the respondent filed an appeal before the Commissioner (Appeals) who observed that theirs is a fit case for invoking of Section 80 of the Finance Act, 1994 and accordingly set aside the imposition of penalty under Section 78 of the Finance Act and allowed their appeal to that extent. Hence the Revenue is in appeal. 2. The Ld. A.R. for the Revenue has submitted that the Ld. Commissioner (Appeal) has erred in invoking Section 80 of the Finance Act. It is his submission that even though the amount was paid prior to issuance of show cause notice and interest during the course of adjudication proceeding, Penalty under Section 78 of the Finance Act, 1994 is imposable in view of the judgments of the Honble Supreme Court in the case of Dharamendra Textile Processors - 2008 (231) E.L.T. 3 (S.C.) and Rajasthan Spinning and Weaving Mills - 2009 (238) E.L.T. 3 (S.C.). However, he could not satisfactorily explain as to how the adjudicating authority has imposed penalty of Rs. 2,78,754/ - under Section 78 of Finance Act when the service tax involved is Rs. 11,15,033/ -.

(3.) THE Ld. advocate appearing for the Respondent has submitted that due to their bona fide impression that the service of rent -a -cab provided to another rent -a -cab operator who ultimately rendered the said service in turn to their clients must have paid the service tax, they have failed to discharge service tax during the relevant period. Further, he submitted that when it was pointed out by the audit party, they immediately paid the entire service tax as they could not produce scheme operator. Their approach all along have been bona fide and hence no penalty is imposable on them and Ld. Commr. (Appeals) has rightly invoked Section 80 of the Finance Act, 1994.