2016 (6) TMI 1494 - AT - Service Tax

Demand of Service tax and imposition of penalty - Section 77 and 78 read with Section 80 of the Finance Act 1994 - International Courier Service - neither service tax paid nor ST-3 returns filed even after collecting from their customers - reason for non-payment is that the courier/cargo industry was facing severe recession - Held that - it is to be noted that the appellant s act of not paying tax collected from their clients to the Revenue is totally unjustified. The facts would not have come to light but for the visit by the department officials. In these circumstances the imposition of penalty is wholly justified. However in this case the penalty from 16 lakhs was reduced to 8, 00, 660/-. This is not a case where the tax was not paid on account of any interpretative issue of law. This is a case where the tax was collected but not paid to the exchequer. This warrants no leniency. Accordingly the impugned order is upheld. - Decided against the appellant

Summary

Issues:
1. Demand of service tax along with penalties under Sections 76, 77 & 78 of the Act for non-payment and non-filing of ST-3 returns.
2. Reduction of penalty under Section 78 from &8377; 16 lakhs to &8377; 8,00,660/- by the LAA.
3. Applicability of penalty provisions under Section 78 for suppression of taxable service value.

Analysis:
1. The appellant, engaged in providing "International Courier Service," faced a demand for service tax of &8377; 8,00,660/- for the period 2008-09 due to non-payment and non-filing of ST-3 returns. The Addl. Commissioner confirmed the demand and imposed penalties under Sections 76, 77 & 78. The Commissioner (Appeals) upheld the demand and the penalty under Section 77, while the LAA reduced the penalty under Section 78 to the equivalent of the tax demand. The appellant admitted the tax liability but cited industry recession for non-payment of the balance tax. The department issued a notice invoking extended period under Section 73 (1) for tax demand, interest, and penalties. The appellant sought waiver of penalty due to payment of the entire tax demand.

2. The LAA reduced the penalty under Section 78 from &8377; 16 lakhs to &8377; 8,00,660/-. The audit revealed non-filing of ST-3 returns and non-payment of service tax despite collecting it from customers, attributed to industry recession. The penalty reduction was challenged, citing Section 78 provisions for suppressing taxable service value. The imposition of the penalty was deemed justified, considering the deliberate non-payment of collected taxes. The reduction to the tax demand equivalent penalty was upheld, emphasizing that non-payment was not due to legal interpretation but failure to remit taxes collected.

3. The penalty under Section 78 for suppressing taxable service value was debated. The appellant's failure to remit collected taxes to the Revenue was viewed as unjustified, warranting penalty imposition. The penalty reduction was deemed appropriate given the circumstances, where collected taxes were not paid to the exchequer. The judgment highlighted the lack of leniency for deliberate non-payment of taxes collected, emphasizing the justification for penalty imposition under Section 78. The appeal was dismissed, upholding the reduced penalty and emphasizing the importance of tax compliance and remittance to the authorities.

This judgment underscores the significance of timely tax payment and filing obligations, especially in cases of collected but unpaid taxes, emphasizing the enforcement of penalty provisions for non-compliance with tax laws.