2011 (1) TMI 736 - AT - Service Tax

Demand - Maintenance and Repair Service - Suppression of facts - department issued two show-cause notices for two different periods, demanding service tax along with interest and invoking penal provisions - CBEC Circular No. 137/167/2006-CX-4 dated 3-10-2007 - The appellant is not a new assessee and were holding service tax registration w.e.f. 12/01/2004 - In case of Union of India v. Rajasthan Spinning & Weaving Mills - (2009 -TMI - 33419 - SUPREME COURT OF INDIA), the Supreme Court has held that mandatory penalty under Section 11AC is imposable if conditions for penal liability spelt out in Section 11AC are fulfilled and payment of duty before issue of show-cause notice does not alter the liability for penalty - Appeal is disposed of

Summary

Issues:
Imposition of penalty under Sections 76, 77, and 78 of the Finance Act.

Detailed Analysis:

1. Background: The appellant, a construction company, provided 'Maintenance and Repair Service' and held service tax registration from 12-1-2004. The department received information from a client regarding the collection of service tax by the appellant but non-payment to the government, leading to show-cause notices for two periods. The lower adjudicating authority confirmed service tax, education cess, and penalties totaling Rs. 3,55,666/-, Rs. 7,114/-, and Rs. 685/- respectively.

2. Appellant's Submission: The appellant cited a delay in filing returns and payment due to the proprietor's father's illness. They argued that penalties should not apply as the tax and interest were paid before the notices, referencing a CBEC circular and tribunal decisions supporting their stance.

3. Respondent's Argument: The department contended that the tax and interest were paid only after the notices, emphasizing that the information came from the client, not the appellant. They disputed the applicability of the circular cited by the appellant and supported the penalties imposed.

4. Decision: The tribunal found the key issue to be the penalty imposition under Sections 76, 77, and 78. It noted that the appellant collected but did not remit the service tax, indicating willful suppression to evade payment. The tribunal referenced case laws to support penalty imposition for such suppression, emphasizing the importance of revenue collection.

5. Case Laws Analysis: The tribunal discussed various case laws highlighting the consequences of suppression of facts and the imposition of penalties, emphasizing the need for compliance with tax regulations and the consequences of non-compliance.

6. Penalty Imposition: Considering the circumstances, the tribunal upheld the appeal but reduced the penalty under Section 76 from Rs. 200/- per day to Rs. 100/- per day, citing the exclusion provided in Section 78 that came into effect after the disputed period.

7. Final Decision: The tribunal upheld the impugned order but modified the penalty under Section 76. The appeal was disposed of accordingly, ensuring justice while emphasizing compliance with tax laws and penalties for non-compliance.