2007 (3) TMI 142 - AT - Service Tax

Penalty(service tax) - Department contended that appellant is liable to pay service tax under Company Secretary service and accordingly demand were made along with penalty - Appellant paid the entire liability before issue of SCN and accordingly penalty reduced

Summary

Issues:
Challenge to penalty under Section 76 of the Finance Act, 1994.

Analysis:
The judgment revolves around the challenge to a penalty imposed under Section 76 of the Finance Act, 1994, amounting to Rs. 31,434. The appellant, a Company Secretary, had failed to deposit the service tax leviable on services rendered between December 2001 and March 2005 until September 14, 2005. The original adjudicating authority imposed penalties under Sections 76, 77, and 78 of the Finance Act, 1994. However, on appeal, the penalty under Section 78 was set aside by the Commissioner (Appeals).

The appellant's representative argued that while not contesting the penalty under Section 77 for late filing of returns, the grievance was against the quantum of penalty under Section 76. It was claimed that the appellant believed in good faith that the duty leviability on Company Secretaries was under challenge before the High Court, and thus, payment of tax was not required until a decision was reached. The representative contended that since the appellant had paid the entire duty along with interest, a 100% penalty was excessively harsh.

In response, the Departmental Representative (DR) argued that the appellant had registered in April 2001 and was aware of the tax liability. The DR highlighted that the issue in dispute before the High Court had been resolved in 2001 itself, as confirmed by the Commissioner (Appeals), negating any grounds for a bona fide belief to justify non-payment of dues during the relevant period.

Upon considering the arguments from both sides, the Tribunal noted that the appellant had deposited the disputed amount with interest before the show cause notice was issued. Acknowledging potential confusion regarding tax payments by Company Secretaries, the Tribunal reduced the penalty imposed under Section 76 to Rs. 15,000. Despite this modification, the appeal was rejected, affirming the penalty with the adjusted amount.

This judgment underscores the importance of timely tax compliance and the implications of penalties under the Finance Act, 1994. It also highlights the significance of bona fide beliefs in tax matters and the Tribunal's discretionary power to adjust penalties based on the circumstances of each case.