By Puloma Dalal, Jayesh Gogri, Mandar Telang Chartered Accountants
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If the appellant had bona fide belief regarding non-taxability and paid Service tax with interest immediately on initiation of investigation, penalty u/s. 78 of Finance Act, 1994 shall not be levied.
Facts:
The appellants were engaged in providing canteen services at the premises of a company, servicing food to their employees. They failed to pay service tax under outdoor caterer’s services. Department conducted an investigation and the demand of service tax with interest and penalties was confirmed against them. It was argued that they were under a bona fide belief that the activity undertaken did not fall under outdoor catering and therefore, they had not collected service tax. Entire Service tax along with interest was paid as soon as investigation was initiated.
The respondents contested that the activity was that of outdoor catering services they had not even taken registration. Therefore, penalties were rightly imposed on them.
Held:
The appellant’s contention that there should be a special occasion for availing catering services was not acceptable. Therefore, the activity undertaken fall under Outdoor Catering service. The Tribunal observed that there was a bona fide belief that the services were not taxable and the tax was paid immediately on initiation of investigation. Therefore, the penalty u/s. 78 of the Finance Act, 1994 was set aside.
