2015 (12) TMI 1600 - AT - Service Tax

Levy of interest on delayed payment of service tax under Section 75 of the Finance Act 1994 - imposition of penalties under Sections 76 77 and 78 of the Finance Act 1994 - Security Services - appellant had not filed ST-3 returns for the period from October 2004 to March 2005 and April 2005 to September 2005 and they have also not paid the service tax dues pertaining to the said period. On the same being pointed out by the audit party the appellants paid the service tax of 22, 87, 217/- and interest amounting to 43, 350/- on different dates - Held that - there is no dispute regarding tax liability which is upheld. The appellant had paid almost the entire amount of service tax due except a small portion before issuance of show cause notice. It is also observed that the remaining amount was paid immediately after the adjudication order. We find force in the arguments of the learned counsel that the penalty equivalent to service tax under Section 78 of the Finance Act 1994 is not warranted in view of the facts of the case. Therefore penalty imposed under Section 78 of the Finance Act 1994 is set-aside. However we find force in the arguments of the learned Authorized Representative that the appellants had not filed ST-3 returns and had not paid the service tax dues though they were aware of their liability. Hence we uphold the penalties imposed under Section 76 and 77 by the adjudicating authority. As the amount of penalty is not quantified in the order-in-original we direct the adjudicating authority to quantify the same in accordance with the impugned order-in-original - appeal allowed by way of remand.

Summary

Issues:
1. Failure to file ST-3 returns and pay service tax dues.
2. Imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994.
3. Appeal against penalties imposed by the original adjudicating authority and confirmed by the Commissioner (Appeals).

Issue 1: Failure to file ST-3 returns and pay service tax dues

The appellant, a registered service provider for Security Services, failed to file ST-3 returns and pay service tax dues for the periods from October 2004 to March 2005 and April 2005 to September 2005. The audit party of the department discovered this non-compliance, leading to the appellant paying the outstanding service tax and interest amounts. A show cause notice was issued, and the Additional Commissioner confirmed the demand under Section 73(i) of the Finance Act, 1994. The original adjudicating authority directed the adjustment of the tax payment, imposed penalties under various sections, and ordered the recovery of interest on delayed payments. The appellant's appeal against this decision was rejected by the Commissioner (Appeals), prompting the appellant to approach the Appellate Tribunal CESTAT AHMEDABAD.

Issue 2: Imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994

The appellant argued that they had paid almost 99% of the service tax dues before the show cause notice was issued, with the remaining amount paid soon after. They claimed the short payment was due to a calculation error and requested the penalties to be set aside. The Tribunal observed that while the tax liability was undisputed and most of the amount was paid before the notice, penalties under Section 78 were deemed unwarranted. However, penalties under Sections 76 and 77 were upheld due to the failure to file ST-3 returns and pay the service tax dues despite being aware of the obligations. The Tribunal directed the adjudicating authority to quantify the penalties in line with the impugned order-in-original.

Issue 3: Appeal against penalties imposed by the original adjudicating authority and confirmed by the Commissioner (Appeals)

The Tribunal, after considering arguments from both sides and examining the records, concluded that while the penalty under Section 78 was set aside, penalties under Sections 76 and 77 were justified. The appellant's compliance with tax payments before and after the notice was taken into account, leading to a modification of the impugned orders to reflect the Tribunal's decision. The appeal was allowed with the specified modifications, providing clarity on the penalties to be imposed.

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