By TIOL News Service

NEW DELHI, JUNE 06, 2014: THE appellant are Direct Marketing Agent/Direct Selling Agents of M/s. ICICI Bank for marketing of car loans etc. The activity of appellant of marketing of services provided by the ICICI Bank is covered by Business Auxiliary Services taxable under section65( 105)(zzb) read with section 65(19) of Finance Act, 1994 since 1st July 2003. The Appellant did not have any service tax registration and were not paying any service tax. Their activity come to the notice of the Departmental Officers when sometime in the year 2004, their records were examined and after completion of enquiry and scrutiny of their records, a Show Cause Notice dt. 26.05.05 was issued to the appellant for demand of service tax amounting to Rs.1 ,13,303 /- for the period from 01.07.03 to 01.07.04 along with interest thereon under section 75 of Finance Act, 1994 and also for imposition of penalty on them under section 76, 77 & 78. The Show Cause Notice was adjudicated by the Assistant Commissioner vide order-in-original dt . 06.12.05 by which the above mentioned service tax demand was confirmed by invoking section 73(a) of Finance Act, 1994 along with interest on the service tax under section 75 ibid and besides this, penalty were imposed on the Appellant under section 76, 77 & 78 ibid. On appeal being filed to the Commissioner (Appeals), against this order, the Commissioner (Appeals), vide order-in-appeal dt . 23.02.07, while upholding the service tax demand of Rs.1 ,03,819 /- along with interest, invoking Section 80, reduced the penalty imposed under section 76 as well as 78 to Rs. 50,000/- each, and totally waived the penalty imposed under section 77. Against this order of the Commissioner (Appeals), this appeal has been filed.

The Tribunal observed,

The appellant are a Direct Marketing Agent for ICICI Bank for marketing of their car loans etc. and there is no dispute that this service is covered by the definition of Business Auxiliary Services as given in 65(105)(zzb) read with section 65(19) and this service was taxable since 01.07.03. The appellants plea is that extended limitation period of five years is not invokable and even penalty under section 78 is not imposable, as in view of the observation of the Commissioner (Appeals) in the last but one paragraph of the impugned order, that as the service tax is comparatively new levy the appellant may not be aware of service tax Rule and Regulations, it cannot be said that these was intention on the part of the Appellant to evade the tax. We do not accept the plea of the appellant with regard to time bar as the period of dispute in this case from 01.07.03 to 01.07.04.

It is only w.e.f. 10.09.04 that the section 73 was substituted by a new section 73 whose language was identical to the language of section 11A(1) of the Central Excise Act, 1944 in which the invoking of extended limitation period of five years from the relevant date is linked with the existence of fraud, wilful mis-statement, suppression of facts and deliberate contravention of rules on part of the assessee. In terms of section 73 as it stood during the period of dispute, for invoking longer limitation period existence of fraud wilful mis-statement, suppression of facts and deliberate contravention of the provisions of Finance Act. 1994 or of the rule made there under with intent to evade tax was not necessary and what was required was reason to believe on the part of the Assistant ./ Deputy Commissioner that on account of omission or failure on the part of the assessee to file return under section 70 for any prescribed period or to disclose wholly or truly all the material facts required for verification of assessment under section 71, some value of the taxable service has escaped assessment or has been under-assessed or service tax has not been paid or has been short-paid or any sum has erroneously been refunded. In this case during the period of dispute the appellant were not filing any return and had not even taken any registration and hence in terms of the section 73(1)(a) as it stood during that period, longer limitation has been correctly invoked.

As regards penalty, we find the Commissioner (Appeals) invoking Section 80 has already reduced the penalty under section 76 & 78 of Rs. 50,000/- each on the ground that as the service tax is comparatively new levy the appellant may not be aware of service tax Rule and Regulations. Since the Commissioner (Appeals) has given a finding that the Appellant may not be aware of service tax rules and regulation, his decision to retain even reduced penalty under section 76 and 78 being not compatible with this finding, is not correct. Therefore the penalty under section 76 & 78 is set aside.

(See 2014-TIOL-959-CESTAT-DEL)