2012 (8) TMI 785 - AT - Service Tax

Penalty Held that - Tax demand has already been discharged with interest - section 80 is invokable - it may not be proper to penalise under section 76 and 78 of the Finance Act, 1994 - to remove hardship, it would be proper to direct the appellant to deposit 25% of the demand towards penalty under section 78 - appeal is allowed partly

Summary

Issues:
1. Penalty aspect of tax liability under section 80 invokable due to delayed compliance.
2. Mitigating factors of financial condition and illness for delayed tax discharge.
3. Applicability of penalty under sections 76 and 78 of the Finance Act, 1994.
4. Direction to deposit 25% of the penalty demand within a specified timeframe.
5. Confirmation of liability under section 77 along with tax demand.

Analysis:
1. The appeal primarily focused on the penalty aspect of the tax liability as the tax demand had already been discharged with interest. The appellant argued that section 80 should be applicable due to delayed compliance caused by financial constraints and a family member's illness, preventing adherence to the law.

2. The show-cause notice revealed that the appellant had collected service tax from clients but failed to deposit it. Despite the mitigating circumstances of financial hardship and illness, the realization of service tax from clients was a crucial factor. Considering this, the Tribunal concluded that total waiver of penalty was not warranted. However, acknowledging the appellant's cooperative attitude, it was deemed inappropriate to penalize under sections 76 and 78 of the Finance Act, 1994.

3. To address the situation and alleviate hardship, the Tribunal directed the appellant to deposit 25% of the penalty demand under section 78 of the Finance Act, 1994 within 30 days of receiving the order. Failure to comply with this directive would result in the order being vacated, allowing the Revenue to pursue the entire outstanding amount through lawful means.

4. Regarding the liability under section 77, it was confirmed along with the tax demand as per the adjudication order. Consequently, the stay application was disposed of, and the appeal was partially allowed based on the specific directions provided for the penalty deposit.

In conclusion, the Tribunal's decision balanced the mitigating circumstances presented by the appellant with the necessity of upholding tax compliance and penalties under the relevant provisions of the Finance Act, 1994.