2011 (11) TMI 518 - AT - Service Tax

Challenging the penalty imposed under Section 78 Held that - The appellants have by their own statement admitted that they recovered the tax amount from the customer which is in the public sector but they did not either pay the tax amount to the Government nor they sought any clarification regarding the category under which they were required to pay the tax - registration and payment of tax and interest has been taken only after the intimation has been sent to assessee - the appellants are guilty of suppression with the intention to evade tax against assessee.

Summary

Issues:
1. Challenge to penalty imposed under Section 78 of the Finance Act, 1994 for tax evasion.

Analysis:
The appellant did not dispute the tax and interest liability but contested the penalty under Section 78, claiming no intent to evade tax due to confusion over the tax category. The appellant argued that they promptly registered and paid taxes upon receiving a departmental letter, indicating no evasion intention. However, the Department contended that the appellant collected service tax from customers but failed to remit it, showing intent to evade tax. The Tribunal noted the appellant's admission of collecting tax without remittance and delayed registration, indicating evasion intent. The original authority highlighted confusion only on tax category, not on liability, leading to the conclusion that the appellant's actions demonstrated a clear intent to evade tax. Consequently, the penalty was upheld, and the appeal was dismissed.

This judgment underscores the significance of timely tax remittance and registration, emphasizing that mere confusion over tax categories does not absolve a party from fulfilling tax obligations. The Tribunal emphasized that actions indicating intent to evade tax, such as collecting but not remitting tax, can lead to penalties under Section 78 of the Finance Act, 1994. The case serves as a reminder that compliance with tax laws is crucial, and any delay or failure to fulfill tax obligations can be construed as evasion, warranting penalties.