Every Departmental Officer is not an Advance Ruling Authority
SHOULD you take the Department's help in clarifying your doubts about taxation? Are the departmental officers competent and knowledgeable to clarify your doubts?
In a recent case before the CESTAT, the Assistant Commissioner of Service Tax was gracious enough to drop the penalty against an assessee, though his language was far from graceful.
The learned AC observed,
"…….. and in the recognition of the fact that the appellant is a small service provider having a small liability 'I do not hope' that the appellant is well equipped with the Rules & Regulations of the Finance Act, 1994; that several similarly placed service providers had expressed unawareness of provisions of the Act"
And on going through in other similar cases, he was satisfied that there was a reasonable cause for the appellant not depositing service tax in time. For this reason, the Assistant Commissioner dropped penalties under section 77 of the Act. However, penalty under Section 78 was imposed while confirming service tax demand for Rs. 1,59,068/-.
Naturally, no Commissioner would tolerate such impudence on the part of a junior officer like the AC in giving an order in favour of the assessee and so the matter was taken in appeal to the learned Commissioner (Appeals).
The learned Commissioner (Appeals) observed:
a doubt on the part of the appellant regarding its taxability to service tax is not relevant;
in case the appellant has a doubt about taxability of the service 'the appellant should have approached the department for clarification' but failed to do so and therefore the appellant had deliberately avoided payment of service tax, suppressed the fact of non-payment of service tax and therefore imposition of penalty under Section 78 is valid.
At the Stay stage, the Tribunal waived pre-deposit and took up the appeal for final disposal.
The Tribunal had some good words for both the lower authorities. The Tribunal observed,
On a careful and detailed consideration of the primary and appellate order we are satisfied that the contradictions in the primary order are compounded by the incoherences in the appellate order as well.
The order of the appellate authority is equally misconceived as there is no provision for an assessee to seek advisory opinion from departmental officers nor is any statutory provision brought to our notice which authorises departmental officers to provide advice on interpretation of provisions of the Act; assessment of transactional facts qua the provisions of the Finance Act, 1994 and provide guidance on taxability or otherwise.
The perception of the learned appellate Commissioner that every departmental officer is a sui generis advance ruling authority is a misconception that has no legislative basis.
In the facts and circumstances, since the primary authority had clearly recorded the finding that the appellant was under bona fide misconception as to the liability to tax and had dropped penalty under Section 77 for that reason, that finding equally covers the case in favour of the assessee both with regard to imposition of penalty under Section 78 as well initiation of proceedings by invoking the extended period of limitation.