2016 (12) TMI 1643 - AT - Service Tax

Penalty u/s 76 and 77 - Commercial or Industrial Construction Services - delayed payment of tax - Held that - there was no malafide on the part of the appellant. The appellant also paid the tax during the investigation and before issuance of the SCN. In this event, imposition of penalty u/s 76 is also not justified. Section 76 provides, where any service tax has not been paid for any reason, other than the reason of fraud or collusion etc., the person who has been served the notice under Section 73(1) of the said Act shall, in addition to the service tax and interest specified in the notice, be also liable to pay penalty - In the present case, the appellant paid the tax before issuance of the SCN and therefore, penalty u/s 76 cannot be sustained - penalty u/s 77 upheld - appeal allowed in part.

Issues:
Waiver of penalty under Section 78, calculation of penalty under Section 76, imposition of penalty under Section 77, limitation period for demand, intention to evade payment of service tax, bonafide belief, inadvertent failure to pay tax, malafide, payment of tax before issuance of show cause notice.

Analysis:

1. Waiver of Penalty under Section 78:
The Ld. Commissioner (Appeals) waived the penalty under Section 78 to the extent of duty paid before the show cause notice was issued. The appellant challenged this decision in the present appeal. The appellant argued that they were engaged in providing taxable services and were mainly serving a specific entity. They contended that the demand was time-barred as the show cause notice was issued after the limitation period for a part of the disputed period. The appellant asserted that there was no intention to evade tax, as they believed in good faith that no tax was due for services provided to a government undertaking. The Lower Appellate Authority acknowledged the appellant's payment during the investigation and before the show cause notice was issued, attributing the failure to pay the full demanded amount to inadvertent reasons.

2. Calculation of Penalty under Section 76:
The appellant argued against the imposition of penalty under Section 76, stating that they had paid the tax before the show cause notice was issued. The Tribunal noted that Section 76 imposes a penalty if service tax remains unpaid for reasons other than fraud or collusion, but if the tax and interest are paid within 30 days of the notice, no penalty is applicable. Given that the appellant paid the tax before the notice, the Tribunal held that the penalty under Section 76 could not be justified.

3. Imposition of Penalty under Section 77:
The Ld. Commissioner (Appeals) upheld the penalty imposed under Section 77. The Tribunal, after considering both sides and reviewing the records, modified the impugned order. It set aside the penalty under Section 76 but upheld the penalty under Section 77. The Tribunal found that there was no malafide intent on the part of the appellant, especially considering their payment before the show cause notice was served.

4. Limitation Period and Intention to Evade Payment:
The appellant argued that a part of the demand was time-barred due to the delay in issuing the show cause notice. They maintained that their belief in not owing tax for services provided to a government entity was genuine. The Tribunal considered these arguments, along with the inadvertent failure to pay the full amount demanded, in its decision-making process.

In conclusion, the Tribunal partially allowed the appeal by setting aside the penalty under Section 76 and upholding the penalty under Section 77. The decision was based on the appellant's payment before the show cause notice, absence of malafide intent, and the circumstances surrounding the tax payment and belief in tax liability.

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