2001 (11) TMI 5 - AT - Service Tax

Service Tax Mandap Keeper Delay in submission of quarterly return under bona fide belief Penalty

Summary

Issues:
Imposition of Penalty under Section 77 of the Finance Act, 1994 for failure to furnish quarterly returns; Justification of penalty amount; Interpretation of Section 77 of the Act; Exercise of discretion under Section 80 of the Act.

Analysis:
The appeal before the Appellate Tribunal CEGAT (NEW DELHI) concerns the imposition of a penalty of Rs. 46,800/- on M/s. Sangam Palace under Section 77 of the Finance Act, 1994, confirmed by the Commissioner (Appeals). The penalty was imposed due to the failure to furnish quarterly returns for specific periods, as mandated by the Act.

In the appeal, the appellant argued through their learned Chartered Accountant that the delay in filing returns was due to a lack of understanding regarding the implications of Service Tax, which was a new concept to them. They contended that they promptly paid all taxes once they comprehended the levy, and highlighted general confusion among Mandap Keepers regarding the applicability of Service Tax, supported by a Trade Notice issued by the Mumbai Commissionerate. The appellant asserted that the penalty amount was disproportionate to the actual tax liability, which was only Rs. 550/- for all three quarters.

On the other hand, the learned SDR countered the arguments by asserting that the penalty under Section 77 was mandatory, especially since the appellants failed to register themselves or submit the required returns within the specified timeframes. Citing a previous decision, it was emphasized that the Act mandates a minimum penalty rate per day for late filing of returns. The SDR argued that the penalty was justified and that the Commissioner had not exercised discretion under Section 80 of the Act.

Upon considering the submissions from both sides, the Tribunal referred to a similar case where it was held that there was a reasonable cause for the non-filing of returns within the specified period due to a genuine belief regarding the applicability of Service Tax to Mandap Keepers. Relying on this precedent, the Tribunal reduced the penalty imposed on the appellant to Rs. 2000/- only, aligning with the principle that there was a justifiable reason for the delay in filing the returns.

Overall, the judgment highlights the importance of interpreting statutory provisions in light of genuine misunderstandings and confusion among taxpayers, ultimately leading to a reduction in the penalty amount imposed on the appellant based on the specific circumstances of the case.