2011 (1) TMI 136 - AT - Service Tax

Penalty - penalties imposed under Section 76 and 77 of the Finance Act, 1994 for non-payment of the service tax and for non-filing of the returns - No reasons have been advanced on behalf of the respondents as to why they did not file the necessary service tax return for the impugned period as required under the law - no such arguments advanced by the respondents at any stage of the case. - the provisions of Section 80 cannot be invoked - penalty equal to the tax amount not paid under Section 76 adequate and no separate penalty is necessary to be imposed under Section 78 of the Act Department s appeal allowed

Summary

Issues:
Department's appeal against waiving penalties under Section 80 of Finance Act, 1994.
Applicability of Section 80 for non-payment of service tax and non-filing of returns.
Penalty under Section 78 in addition to penalties under Section 76.
Amendment in service tax law making penalties under Section 76 and 78 mutually exclusive.

Analysis:
1. The Department appealed against the lower appellate authority's decision to waive penalties imposed on the respondents under Section 80 of the Finance Act, 1994. The Department argued that the respondents were liable to pay service tax from 1.7.2003 and had not paid service tax or filed returns for the period from April 2006 to October 2006. The Department contended that the respondents, being aware of their tax obligations, should not benefit from the provisions of Section 80 meant for new assesses unaware of legal provisions.

2. The respondents, represented by their counsel, argued that they were small assesses receiving commission charges and paid the tax amount out of their own pocket upon being informed by the departmental authorities. They claimed that Section 80 was rightly applied by the lower appellate authority in their case.

3. The presiding judge found merit in the Department's argument, noting that the respondents were not new assesses and had been under the service tax net since 1.7.2003. The judge highlighted that the respondents failed to provide reasons for not filing necessary service tax returns for the relevant period and did not produce evidence regarding the tax amounts received. The judge concluded that Section 80 could not be invoked for assesses well aware of their legal obligations, leading to the restoration of penalties under Section 76 and 77 by setting aside the lower appellate authority's decision.

4. Regarding the penalty under Section 78, the judge opined that a penalty equal to the unpaid tax under Section 76 sufficed, and no separate penalty under Section 78 was necessary. The judge also considered the subsequent amendment in the service tax law, making penalties under Section 76 and 78 mutually exclusive. Consequently, the Department's appeal was allowed, upholding penalties under Section 76 and setting aside the penalties waived under Section 80 by the lower appellate authority.