2010 (7) TMI 862 - AT - Central Excise

Penalties u/s 76 and 77 of FA - violation of provisions of Section 70 of Finance Act, 1994 since the return was delayed by 187 days - violation of Section 68 of Finance Act, 1994 since there was a delayed payment of service tax ranging from 286 days to 194 days - Held that - The benefit of Section 80 of Finance Act, 1994 cannot be extended to the appellant inasmuch as they were aware of their responsibility to file the return in time and to deposit tax within the period. Having not done so, they have invited the penalties under Section 76 and 77 of the Act. The penalty under Section 76 has already been kept by the lower authorities equal to the demand, though there was a delay of 766 days and by calculating the penalty @ ₹ 200/-per day as per the provisions of Section 76 of Finance Act, 1994, the same would come to ₹ 1,53,200/-. Appeal dismissed - decided against appellant.

Summary

Issues:
Violation of provisions of Section 70 and Section 68 of Finance Act, 1994 leading to delayed return and payment of service tax, Imposition of penalties under Section 76 and Section 77, Rejection of plea for reduction of penalties based on extenuating circumstances.

Analysis:

1. Violation of Provisions of Section 70 and Section 68:
The appellant, a construction services provider, faced scrutiny for delayed ST-3 return and service tax payment violations. The delay in filing the return by 187 days and late payment of service tax ranging from 286 to 194 days constituted breaches of Section 70 and Section 68 of the Finance Act, 1994.

2. Imposition of Penalties under Section 76 and Section 77:
A show cause notice was issued proposing penalties under Section 76 for failure to make full payment of service tax within the time limit and under Section 77 for failing to file the return promptly. The lower authorities imposed penalties of Rs. 69,596 under Section 76 and Rs. 1,000 under Section 77, which were upheld by the Commissioner (Appeals).

3. Rejection of Plea for Reduction of Penalties:
The appellant's plea for penalty reduction due to extenuating circumstances, citing the illness of the proprietor's mother and financial difficulties, was dismissed by the Commissioner (Appeals). The appellate authority concurred, emphasizing that penalties under Section 76 and 77 cannot be automatically reduced when the law mandates their imposition for non-compliance.

4. Judgment and Conclusion:
The appellate tribunal affirmed the penalties imposed, noting that the appellant's awareness of their obligations to file returns and pay taxes on time precluded them from availing the benefit of Section 80 of the Finance Act, 1994. Despite the penalty under Section 76 being set equal to the demand, the tribunal highlighted that the penalty calculation at Rs. 200 per day could amount to Rs. 1,53,200. Consequently, the appeal was rejected, upholding the penalties imposed by the lower authorities.

In conclusion, the judgment underscores the importance of timely compliance with tax obligations and the limited scope for penalty reduction in cases of delayed returns and payments, emphasizing the strict application of statutory provisions to ensure regulatory adherence.