2011 (11) TMI 525 - AT - Service Tax

Application for stay - Delayed payment of service tax - Penalty u/s 76 - Held that the net demand raised on the appellants is only Rs 4,766/ - towards tax and the adjudicating Commissioner has demanded interest amounts of Rs. 511/ - and Rs.76,972/ - All these amounts have been paid by the appellants, according to the ld. Advocate. In addition, a penalty of Rs.8,87,392/ - has been imposed on the appellants After the amendment made with effect from 18.4.2006, the penalty prescribed under Section 76 of the Finance Act, 1994, has become mandatory as the amended provision now requires that the tax payer shall pay the penalty as specified in the said section - the legal provisions under Section 76 do not provide any lee way to carve out any exception as the same provides for no discretion. Hence the appeal of the appellants fails in respect of the period from 18.4.2006 onwards Delayed tax deposited after issuance of SCN - the delay in payment of tax ranges from 413 days to 812 days - The delays are substantial, as the penalty provision under Section 76 was not mandatory prior to the amendment made in 2006, some leniency can be shown to the appellants. Accordingly, as regards the period prior to 18.4.2006, penalty imposed is reduced to Rs.50,000/. The impugned order is modified to the above extent and the matter is remitted to the original authority for the limited purpose of re-quantifying the penalty amount taking into consideration the above reduction in penalty - Decided in favor of the assessee

Summary

Issues Involved:
1. Delay in filing the appeal.
2. Contesting the penalty imposed.
3. Application for condonation of delay.

Detailed Analysis:

1. Delay in Filing the Appeal:
The appeal was filed after a delay of 659 days. The appellants requested condonation of the delay, arguing that the impugned order was delivered to their watchman, and they were unaware of its delivery. The tribunal acknowledged the delay but did not provide a specific ruling on the condonation application, proceeding instead to address the substantive issues of the case.

2. Contesting the Penalty Imposed:
The appellants did not contest the tax and interest liabilities as quantified by the adjudicating Commissioner but argued that the penalty of Rs. 8,87,392/- imposed was disproportionately high. The tribunal noted that the net tax demand was Rs. 4,766/-, with interest amounts of Rs. 511/- and Rs. 76,972/-, all of which had been paid by the appellants.

The adjudicating Commissioner calculated the penalty at 2% per month of delay and Rs. 200 per day, opting for the higher penalty in each case. The tribunal observed that the penalty imposed seemed disproportionately high but acknowledged that the Commissioner had explained the calculation method in the annexures to the impugned order.

3. Application for Condonation of Delay:
The tribunal discussed the amendment made to Section 76 of the Finance Act, 1994, effective from 18.4.2006, which made the penalty mandatory, leaving no discretion to reduce it based on extenuating circumstances. The appellants argued that cash flow problems caused delays in payment, but the tribunal noted that the legal provisions did not allow for exceptions. Therefore, the appeal failed concerning the period from 18.4.2006 onwards.

For the period prior to April 2006, the delay in tax payment ranged from 413 days to 812 days, with a penalty of about Rs. 1.50 lakhs. The tribunal noted that since the penalty provision under Section 76 was not mandatory before the 2006 amendment, some leniency could be shown. Consequently, the penalty for the period before 18.4.2006 was reduced to Rs. 50,000/-. The impugned order was modified accordingly, and the matter was remitted to the original authority to re-quantify the penalty considering the reduction.

Conclusion:
The tribunal partly allowed the appeal by reducing the penalty for the period before 18.4.2006 and remitting the matter for re-quantification. The stay application and miscellaneous application were allowed in view of the partial allowance of the appeal.