2013 (8) TMI 415 - AT - Service Tax

Penalty on service tax default section 76 Failure to pay service tax on GTA service under reverse charge method respondent pleaded that they were not aware of the relevant service tax provisions - Held that - Penalty is liable to be imposed on the respondent under Section 76 - assessee suppressed the factum of having availed GTA service for such purpose over a period of time assessee has not come with clean hands to oppose the proposal for imposition of Section 76 penalty - court rejected the contention of ignorance of law particularly when such plea comes from a corporate entity which is engaged in the manufacture of excisable products - corporate recipient of GTA service became a person liable to pay service tax w.e.f. 01/01/2005 by virtue of the aforesaid rule made by the Central Government and notified to the public under Section 68 - only reason stated was that the non-payment of service tax was not willful cannot be accepted- appeal allowed in the favour of the revenue.

Summary

Issues:
Non-imposition of penalty under Section 76 of the Finance Act, 1994 on the respondent for failure to pay service tax on Goods Transport Agents (GTA) services.

Analysis:

Issue 1: Non-imposition of penalty under Section 76
The appeal filed by the Department challenged the non-imposition of penalty on the respondent under Section 76 of the Finance Act, 1994 for their failure to pay service tax on GTA services. The respondent, engaged in manufacturing excisable products, availed GTA services but failed to pay service tax, register with the Department, file service tax returns, or make service tax payments. The original authority confirmed the demand of service tax with interest, imposed penalties under Sections 77 and 78, but refrained from imposing a penalty under Section 76. The Department appealed, arguing that ignorance of law and prior payment of service tax were not reasonable causes to waive the penalty under Section 76.

Issue 2: Reasonable cause for failure to pay service tax
The respondent claimed ignorance of relevant service tax provisions until 2009 when they obtained registration and started paying service tax. They argued that the penalty under Section 78 was paid, but no evidence was provided. The Department contended that ignorance of law was not a valid excuse, especially for a corporate entity engaged in manufacturing since 1995. The appellate authority granted the benefit of Section 80 to the respondent, considering a reasonable cause for the failure to pay service tax.

Issue 3: Imposition of penalty under Section 76
The Tribunal rejected the plea of ignorance of law, emphasizing that ignorance cannot be an excuse, especially when the relevant provisions were in force since 2005. The respondent's failure to pay service tax was deemed wilful, as no valid reason was presented for the delay. The Tribunal held that a penalty under Section 76 should be imposed on the respondent, directing the original authority to determine the penalty amount after providing a reasonable opportunity for the respondent to be heard.

In conclusion, the Tribunal found that the respondent's failure to pay service tax on GTA services warranted the imposition of a penalty under Section 76 of the Finance Act, 1994, despite their claims of ignorance and prior payment of penalties. The judgment emphasized that ignorance of the law is not a valid defense for non-compliance with tax obligations.