Ignorance of changes to an exemption notification does not excuse service-tax non-payment or avoid penalty.

The appellant, a service-tax registrant, faced a show-cause notice proposing recovery of service tax based on differences between its ST-3 returns and receipts shown in Form 26AS and its accounts.

The Assistant Commissioner confirmed a reduced demand, with interest and penalties under Sections 77 and 78 of the Finance Act, 1994, and a late fee.

The Commissioner (Appeals) further reduced the demand.

The appellant challenged the surviving demand, arguing that its failure to pay tax following changes to an exemption notification resulted from ignorance of the amendment, not an intent to evade tax.

The Tribunal dismissed the appeal.

1. Whether the appellant’s claimed ignorance of amendments to the exemption notification was sufficient to set aside the surviving service-tax demand, including any demand beyond the normal limitation period.

2. Whether the appellant’s claimed lack of intent or reasonable cause precluded the penalty under Section 78 for the disputed period.

Section 73 of the Finance Act, 1994 provides for recovery of service tax not levied or paid, or short-levied or short-paid; Section 75 provides for interest on delayed payment; and Section 78 provides for a penalty in cases covered by that provision.

The Tribunal noted that Section 80 had permitted penalties under Sections 76, 77 or 78 to be waived where the assessee proved reasonable cause, but held that it did not apply to the post-2015 disputed period.

The Tribunal also considered Notification No. 25/2012-ST, which provided the claimed exemptions, and Notification No. 30/2012-ST concerning reverse-charge liability.

The Tribunal found that the appellant had not established entitlement to exemption for the services in question after 1 March 2015, and had not produced documents supporting exemption from the surviving demand.

It accepted the lower authorities’ reductions for applicable exemptions and abatements, but rejected ignorance of the notification amendment as a justification for non-payment, reasoning that a service provider claiming an exemption must keep track of changes to it.

As the disputed period was after 2015, the Tribunal held that Section 80’s reasonable-cause protection was unavailable and sustained the Section 78 penalty.

It did not separately elaborate on the limitation calculation.