2011 (9) TMI 126 - AT - Service Tax

Maintenance and repair service - service tax collected but not deposited - appellant has not intimated the payment of service tax to the Central Excise officer though they have filed the return for October 2006 to March 2007 on 5.10.2007. There is no communication in the said return about the tax liability that has been discharged by them amounting to Rs.1,30,477/- for the period from October 2006 to December 2006. - demand of service tax penalty upheld.

Summary

Issues:
1. Failure to remit service tax collected from customers.
2. Non-filing of service tax returns.
3. Imposition of penalty under Section 76 of the Finance Act, 1994.

Analysis:
1. The appellant, a provider of taxable services, failed to remit service tax collected from customers for the period of October 2006 to March 2007. Despite paying the tax and interest upon detection by the department, a penalty was proposed under Sections 73 and 75 of the Finance Act, 1994. The Jurisdictional Additional Commissioner confirmed the demand for service tax, interest, and imposed a penalty for late payment.

2. The appellant challenged the penalty imposition before the Commissioner (Appeals) who upheld it, citing delayed tax payment and failure to file ST-3 returns. The appellant argued that they had intimated the department about the tax payment before the show-cause notice was issued, thus claiming exemption from penalty under sub-section (3) of Section 73 of the Finance Act, 1994.

3. The department contended that the appellant collected service tax but delayed remittance, paying only after departmental investigation began. Section 76 of the Finance Act, 1994 mandates penalties for failure to pay service tax promptly. The penalty is calculated based on a daily rate or a percentage of the tax amount, with a minimum threshold, for each day of delay.

4. The judgment considered the provisions of sub-section (3) of Section 73, emphasizing the requirement for taxpayers to inform the tax authorities in writing about tax payments before any notice is served. Since the appellant did not communicate the payment of service tax to the Central Excise officer despite filing returns, a show-cause notice was rightly issued, proposing a penalty for non-payment of service tax. The judgment upheld the penalties imposed by the lower authorities under Section 76 of the Finance Act, 1994, due to deliberate non-payment of service tax, dismissing the appeal for lack of merit.