2013 (1) TMI 270 - AT - Service Tax

Penalty u/s 76 - Business auxiliary services - Delay in deposit of service tax - Bills for the services rendered during the period April, 2006 to December, 2006 raised in December, 2006 - The cheque for the same was received on 4.1.2007 - Deposited in the bank account on 5.2.2007 - The Service Tax was to be paid by 5.3.07 - Held that - Since cheque was received on 4.1.2007, the same was actually deposited in the bank on 5.2.2007 and must have been encashed on a date after that. As such, it is to be considered as if the consideration for the services was received by the appellant in the month of February itself, thus requiring them to deposit the tax with the department in March, 2007. No delay in depositing the service tax. No imposition of penalty. In favour of assessee

Summary

Issues: Imposition of penalty under section 76 of the Finance Act, 1994.

In this case, the appellant was providing business auxiliary services and was found to have not deposited Service Tax for services rendered between April, 2006 to December, 2006. The appellant admitted to raising bills for the services during this period, receiving the payment in January, and depositing the cheque in February. The original adjudicating authority imposed penalties under sections 76, 77, and 78 of the Finance Act, 1994. On appeal, the Commissioner (Appeals) set aside penalties under sections 77 and 78 but upheld the penalty under section 76, leading to the current appeal.

The key issue revolved around the interpretation of section 76 of the Finance Act, which provides for the imposition of a penalty if a person fails to pay Service Tax as required under section 68. Section 68 mandates the discharge of tax liability by the 5th of the next month following the receipt of consideration for services. The appellant received the cheque in January but deposited it in February, leading to the question of whether the tax was paid within the stipulated time frame.

The appellate tribunal, after considering the timeline of cheque receipt and deposit, concluded that the consideration for services was received in February, requiring tax payment in March 2007. As there was no delay in depositing the Service Tax, the tribunal set aside the penalty imposed under section 76, providing consequential relief to the appellant. The tribunal's decision hinged on the strict interpretation of the timeline for tax payment as per the provisions of the Finance Act.

Ultimately, the appeal was disposed of with the penalty under section 76 being set aside, highlighting the importance of adherence to the statutory timelines for tax payment as outlined in the Finance Act, 1994.