Penalties imposed u/s 77 and 78 are not valid in the absence of deliberate suppression of fact: ITAT [Read Order]

The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that Penalties imposed u/s 77 and 78 are not valid in the absence of deliberate suppression of fact.

M/s. RPP Infra Projects Ltd, the appellants engaged in providing various taxable services are holding service tax registration with the department. It was noticed that they have a short-paid service tax of Rs.3,10,008/- for the period 2010 – 11 and 2011 – 12 on goods transport agency service. The appellant then paid the service tax along with interest on being pointed out by the department.

After due process of law, the original authority imposed penalties under sections 77 and 78 of the Finance Act, of 1994. The appellant filed an appeal before Commissioner (Appeals) who upheld the same.

Shri D. Jaishankar, counsel appeared on the appellant stated that immediately when the audit had pointed out the short-payment of service tax, the appellant had paid up the entire amount along with interest. The appellant was under the bonafide belief that the said amount of freight paid by the appellant is not taxable under the GTA service and not paid the service tax.

On being pointed out by the department, the appellant had paid up the tax to buy peace and to avoid litigation.

It was viewed that the appellant did not pay the tax only because the appellant was under the belief that such an amount is not taxable and the issue about GTA service was interpretational in nature during the relevant time. The Shri R. Rajarajamn appeared for the respondent and supported the findings in the impugned order.

Ms Sulekha Beevi C.S., Member (Judicial)observed that there was no deliberate suppression and they were under the bonafide belief that the said amount of freight paid which has been accounted for in the ledger as “conveyance others” during the relevant time was not taxable as per the definition of GTA services during the relevant period.

The Tribunal observed that there was no deliberate suppression of facts and held that the penalties imposed under sections 77 and 78 are not legal and proper and set aside. The appeal was allowed.

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