2013 (5) TMI 671 - AT - Service Tax

Penalty - Non payment of service tax amount to the department despite being collected from the client - The only issue involved in this case is imposition of equal amount of penalty under Section 78. The allegation of the department is that the appellant deposited the Service Tax after being pointed out by the department and thus they intentionally suppressed the facts, thus liable for the penalty. - held that - The appellant could not pay Service Tax only on the bona fide belief that they have to pay Service Tax after completion of the entire service not on the basis of account payment received in several lots. The department could not bring out any suppression or wilful misstatement or any intention to evade duty on the part of the appellant. Hon ble Supreme Court judgment in the case of Rajasthan Spinning Mills (2009 (5) TMI 15 - SUPREME COURT OF INDIA) would apply in cases where ingredients of fraud or collusion or wilful misstatement or suppression of facts or contravention of any of the provisions of this Chapter or the rules made thereunder with intent to evade payment of Service Tax are present.- penalty waived. - decided in favor of assessee.

Summary

Issues: Application for waiver of pre-deposit of penalty, Imposition of penalty under Section 78 of Finance Act, 1994

In this judgment by the Appellate Tribunal CESTAT KOLKATA, the applicant filed an application seeking waiver of pre-deposit of penalty amounting to Rs. 4,51,758. The applicant contended that they had already paid the Service Tax and interest before the show cause notice was issued. The Tribunal found that the appeal could be disposed of at that stage with the consent of both parties, waiving the pre-deposit requirement. The case involved the appellant's failure to pay Service Tax for a specific period, despite receiving the amount from their client. Upon audit detection, the appellant paid the Service Tax and interest. The department then issued a show cause notice for penalty under Section 78 of the Finance Act, 1994.

The appellant argued that they believed Service Tax was due only upon completion of the entire service, hence they did not pay based on partial payments received. They acknowledged the Service Tax and interest paid but disputed the imposition of an equal penalty under Section 78, asserting no intent to evade tax and citing a genuine belief as the reason for delayed payment. The department, represented by the ld. A.R. Shri K.P. Singh, contended that the penalty was justified under sub-section 78(1)(d)(e), emphasizing the failure to pay tax until pointed out, suggesting potential evasion if not detected. The department also relied on a Supreme Court decision in Union of India v. Rajasthan Spinning Mills.

The Tribunal clarified that the issue at hand was solely the imposition of an equal penalty under Section 78, not the Service Tax or interest payment. It noted that the department's allegation of intentional suppression of facts by the appellant was unfounded, as the show cause notice did not indicate fraud, collusion, wilful misstatement, or intent to evade tax. The appellant's belief regarding payment timing was deemed genuine, with no evidence of suppression or intent to evade tax. The Tribunal referenced the Supreme Court's decision in Rajasthan Spinning Mills, highlighting the necessity of fraud or collusion for penalty imposition. Consequently, the impugned order-in-appeal was set aside, and the appeal was allowed, with the stay petition also being disposed of.