2011 (2) TMI 224 - AT - Service Tax

Demand - Security Services - there was a difference in value as compared with ST-3 returns filed with the department and therefore there was short payment of Service Tax amounting to Rs. 1, 05, 494 for the period April 2004 to March 2005 - This is strengthened by the fact that the appellant did not challenge the demand for Service Tax and interest and wanted to end the litigation by paying the tax with interest - it is a fit case for invoking provisions of section 80 of Finance Act 1994 which provides that if a reasonable cause is shown penalties under sections 77 and 78 of Finance Act 1994 can be waived - Decided in favour of the assessee

Summary

Issues:
- Discrepancy in the value of service provided in ST-3 returns and Profit & Loss Account
- Imposition of penalties under sections 77 and 78 of Finance Act, 1994
- Submission of additional evidence regarding reimbursement
- Applicability of section 80 of Finance Act, 1994 for waiver of penalties

Discrepancy in the value of service provided in ST-3 returns and Profit & Loss Account:
The case involved a situation where the appellants, providing taxable "Security Services," had a variance in the value of services shown in their ST-3 returns compared to their Profit & Loss Account. This discrepancy led to a short payment of Service Tax amounting to Rs. 1,05,494 for a specific period. Upon receiving a show-cause notice and subsequent proceedings, penalties were imposed under sections 77 and 78 of the Finance Act, 1994.

Imposition of penalties under sections 77 and 78 of Finance Act, 1994:
During the proceedings, the Chartered Accountant representing the appellant acknowledged the discrepancy but highlighted that it arose due to the exclusion of reimbursement received from customers in the service value calculation. The appellant did not contest the Service Tax levy and demonstrated a genuine effort to rectify the error by paying the due amount along with interest promptly upon discovery. The Tribunal considered the appellant's actions, including self-calculation of the differential Service Tax, submission of documents, and timely payment, as indicative of a bona fide mistake rather than intentional tax evasion. Citing the provisions of section 73 of the Finance Act, 1994, the Tribunal noted that the appellant's payment of tax with interest was a significant factor in deciding to waive penalties under sections 77 and 78.

Submission of additional evidence regarding reimbursement:
The appellant's representative admitted that the issue of reimbursement was not raised before the adjudicating or appellate authorities but was brought up during the appeal before the Tribunal. However, the Tribunal emphasized that the submission regarding reimbursement could not be considered without an order allowing the presentation of additional evidence.

Applicability of section 80 of Finance Act, 1994 for waiver of penalties:
Considering the circumstances, the Tribunal invoked section 80 of the Finance Act, 1994, which allows for the waiver of penalties under sections 77 and 78 if a reasonable cause is demonstrated. The Tribunal found that the appellant's actions, such as promptly paying the tax upon discovery of the discrepancy, seeking verification from a Chartered Accountant, and voluntarily submitting the corrected figures, indicated a lack of intent to evade taxes. Relying on a precedent involving a similar situation, the Tribunal concluded that the case warranted the waiver of penalties under sections 77 and 78, ultimately setting aside the penalties and allowing the appeal in favor of the appellant.