2011 (2) TMI 540 - AT - Service Tax

Waiver of pre-deposit - Application for stay - Prima facie, the appellant s conduct was with intent to evade payment of service tax inasmuch as they collected service tax from the customers and retained the money with them and paid the amount only when investigations were launched by DGCEI - Moreover, the appellant cannot claim exoneration from penal liability solely on the basis that they paid service tax with interest prior to issue of show-cause notice - Prima facie, the appellant has no case against the penalties imposed on them - Decided in favor of the assessee by way of direction to deposit Rs. 20 Lakhs

Summary

Issues:
- Waiver of pre-deposit and stay of recovery of penalties imposed under Sections 76, 77, and 78 of the Finance Act, 1994.
- Applicability of Section 73(3) of the Finance Act, 1994 to the case.
- Intent to evade payment of service tax by the appellant.
- Benefit of voluntary payment of service tax with interest before the issuance of a show-cause notice.

Analysis:

1. Waiver of Pre-deposit and Stay of Recovery: The appellant sought waiver and stay in respect of penalties imposed under Sections 76, 77, and 78 of the Finance Act, 1994. The Commissioner confirmed a demand of service tax, which was paid by the appellant before the issuance of the show-cause notice. The appellant prayed for setting aside the penalties only. The Tribunal found no prima facie case for the appellant, stating that the appellant's conduct indicated an intent to evade payment. Consequently, the Tribunal directed the appellant to pre-deposit a sum of Rs. Twenty lakhs within four weeks.

2. Applicability of Section 73(3) of the Finance Act: The appellant argued for the benefit of Section 73(3) of the Finance Act, 1994, claiming that they voluntarily paid the service tax with interest. However, the Tribunal held that the payment made by the appellant was not voluntary, as they collected service tax from customers but did not remit it to the exchequer until investigations were launched. The Tribunal concluded that the appellant could not claim exoneration from penal liability based solely on pre-payment of service tax with interest.

3. Intent to Evade Payment: The appellant contended that they had no intent to evade payment of service tax, as the failure to remit the tax was due to the fraudulent actions of their accountant. However, the Tribunal noted that the appellant collected the tax from customers but retained it, paying only when investigations were initiated. This behavior indicated an intent to evade payment, leading to the conclusion that the payment made was not voluntary.

4. Benefit of Voluntary Payment: The Tribunal emphasized that the mere payment of service tax with interest before the issuance of a show-cause notice did not absolve the appellant from penal liability. Citing relevant judgments, the Tribunal held that such payment could not be considered voluntary in the absence of proactive compliance with tax obligations. The decisions cited supported the view that the appellant could not escape penal liability merely by making payments before formal proceedings.

In conclusion, the Tribunal denied the appellant's request for waiver and stay of penalties, directing them to pre-deposit a specified amount within a set timeframe. The judgment underscored the importance of timely compliance with tax obligations and the consequences of actions indicating an intent to evade payment.