Non Service Tax Registration Due to Bonafide Belief of Exemption: CESTAT reduces Penalty u/s 77(1)(a) of Finance Act [Read Order]

The Chennai Bench of Customs, Excise And Service Tax Appellate Tribunal (CESTAT) held that the penalty imposed under section 77(1)(a) of the Finance Act 1994 for non registration of service tax due to bonafide belief of exemption was reduced to Rs 10,000/-.

M/s. Micro Chip Office Solutions , the appellant assessee was engaged in the sale of computers, printers and peripherals and other related accessories apart from undertaking maintenance of computers, printers and “RICOH” brand “Photo copier machines” on annual contract as well as on call basis.

The assessee was issued with a Show cause notice for non-payment of service tax . The Joint Commissioner of Central Excise & Service Tax, Trichy confirmed the demand and imposed a penalty of Rs. 2,74,400/- for failure to take service tax registration. The Commissioner of Customs & Central Excise (Appeals) rejected the appeal.

Shri D Jaishankar, the counsel for the assessee contended that the lower appellate authority had wrongly denied the benefit, which provides exemption from service tax in respect of the value of goods and materials sold to the recipient of service. It was also submitted that the service provider was eligible to avail exemption in respect of the amount charged on "sale of consumables" used during the service.

Shri S. Balakumar, the counsel for the respondent contended that the assessee failed to produce evidence of sale of materials or goods while providing the service. It was also submitted that the contract with the customers did not provide any breakup of goods, materials and consumables, and there was no description of goods sold in the invoices.

The bench observed that the assessee had collected service tax without registration and failed to credit it into the Government account and the extended period was rightly invoked for demand of service tax and imposition of penalties in this case.

The two member bench comprising of P. Dinesha (Judicial) And Vasa Seshagiri Rao (Accountant) held that the imposition of penalty and the amount computed was absolutely legal, for the ends of justice and considering all the facts, the penalty imposed under section 77(1) (a) of the Finance Act, 1994 was limited to Rs. 10,000/- while rejecting the appeal.

To Read the full text of the Order CLICK HERE

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