2006 (11) TMI 492 - AT - Service Tax

Imposition of Penalty - delay for payment of Service Tax - Notice Sent by speed post - Tour Operator Service - exigible to tax - HELD THAT - Penalty is a preventive as well as deterrent measure to defeat recurrence of breach of law and also to discourage non-compliance to the law of any wilful breach. Penalty prescribed by Section 76 is levy on service tax on the consideration received in relation to Tour Operator Service which came into force from 1997 and well known to tour operators. The decisions on which the Ld. Commissioner (Appeals) relied upon relates to the matter of Central Excise and mere payment of service tax before issue of show cause notice does not alter commission of breach of law on the date of commissioning of the offence. Casual plea of the assessee that they spent substantial money on advertisement and other expenses to attract travel loving people does not appear to be reasonable cause to exonerate from penalty. Of course, just because penalty is prescribed that should not mechanically be levied following Apex Court s decision in the case of Hindustan Steel Ltd. v. State of Orissa 1969 (8) TMI 31 - SUPREME COURT . Section 80 of the Act having made provision for excuse from levy of penalty under section 76 if the assessee proves that there was a reasonable cause for failure under that section no other criteria is mandate of Law to exonerate from penalty. No reasonable cause being patent from the record towards failure to deposit the tax due, duly, except the casual approach of aforesaid, the ld. Commissioner (Appeals) was not justified to set aside the penalty levied u/s 76 of the Act. Thus, to meet the end of justice, the learned Adjudicating Officer would do well to determine assessable value of service u/s 67 of the Act and determine tax liability afresh as well as impose penalty @ Rs. 100/- each for everyday of default on the defaulted amount or @ 2 per cent of tax due per month whichever is higher as per law as in for on the day of default. In the result order of learned Commissioner of Central Excise (Appeals) waiving penalty u/s 76 of the Act is set aside. The Respondent gets relief to the extinct (sic) (extent) indicated aforesaid and appeal of Revenue allowed in the manner decided as aforesaid.

Summary

Issues:
1. Waiver of penalty under section 76 of the Finance Act 1994 for belated payment of service tax.
2. Imposition of penalties under sections 77 and 75A of the Act.
3. Applicability of penalty provisions in relation to the timing of payment and issuance of show cause notice.
4. Compliance with mandatory provisions for imposition of penalty under section 76.

Analysis:
1. The appeal was filed against the waiver of penalty of Rs. 8,236 imposed by the Adjudicating Authority under section 76 of the Finance Act 1994 for belated payment of service tax for Tour Operator Service. The Commissioner (Appeals) set aside the penalty under section 76 based on precedents citing that the tax was deposited before the show cause notice was issued, following decisions in similar cases. However, penalties under sections 77 and 75A were upheld.

2. The Adjudicating Officer found a delay in tax payment ranging from 23 to 296 days for the period in question, with no reasonable cause presented by the assessee. The imposition of penalties under sections 77 and 75A was deemed appropriate due to the undisputed delays in payment and lack of justifiable reasons provided by the assessee.

3. The Tribunal emphasized that penalty serves as a preventive and deterrent measure against non-compliance with the law. The Commissioner's decision to waive the penalty under section 76 was overturned, stating that the mere payment of tax before the show cause notice does not absolve the assessee of breaching the law at the time of the offense. The Tribunal highlighted the requirement of proving a reasonable cause under Section 80 of the Act to excuse from penalty, which was not demonstrated in this case.

4. The Tribunal differentiated the provisions of the Central Excise Act from the Finance Act, emphasizing the mandatory nature of penalty under section 76 of the Finance Act 1994. The Tribunal directed the Adjudicating Officer to reassess the tax liability and impose penalties as per the law, considering the assessable value of the service and the defaulted amount.

In conclusion, the waiver of penalty under section 76 was set aside, and the appeal of the Revenue was allowed, with the Adjudicating Officer instructed to reevaluate the tax liability and impose penalties accordingly.