2013 (11) TMI 401 - AT - Service Tax

Power of adjudicatory authority u/s 80 to waive penalty - Whether financial hardship is a reasonable cause for exercising the powers by the adjudicating authority under Section 80 of the Act Held that - The benefit of the Section 80 of the Act cannot be extended to the appellant in as much as they were aware of their responsibility to file the return and deposit the tax in time - Relying upon Inma International Security Academy P. Ltd. versus CCE, Chennai 2005 (11) TMI 1 - CESTAT - Chennai - the revisionary order passed by the Commissioner to file appeal against the order cannot be faulted with - the appellant could not show that he could not pay the tax on account of bona fide mistakes or under the impression that tax was not payable due to interpretation thus they could not show that there existed reasonable cause. Commissioner (Appeals) has not quantified the penalty to be paid - He has also not considered Appellant s claims as to whether the appellant was eligible to the benefit of the provisions of Section 73(3) of the Act on the ground that they paid a substantial amount of service tax alongwith interest before issue of show cause notice - order of the lower authorities set aside and the case remitted back to the adjudicating authority to decide the case afresh of the Appellant.

Summary

Issues:
Delay in filing Service Tax Returns and payment of Service Tax, imposition of penalty under Section 76 of the Finance Act, 1994, imposition of penalty under Rule 7C for delayed submission of ST-3 Return, interpretation of Section 80 of the Finance Act, 1994 regarding waiver of penalty for financial hardship.

Analysis:
The appeal was filed against an Order-in-Appeal that allowed the appeal filed by the Revenue and imposed a penalty under Section 76 of the Finance Act, 1994. The case involved delays in filing Service Tax Returns and payment of Service Tax for construction and maintenance services. The Adjudicating Authority confirmed interest and imposed a penalty under Rule 7C of the Rules but waived the penalty under Section 76 by exercising powers under Section 80 of the Act. The Revenue appealed to the Commissioner (Appeals) who held that penalty under Section 76 was imposable and that the benefit of Section 80 could not be extended. The appellant contested this decision, citing judgments from the Hon'ble High Court of Karnataka and other cases to support their claim that financial difficulty was a reasonable cause for the delay. The Revenue argued that financial crisis cannot be considered a reasonable cause for waiver of penalty. The issue revolved around whether financial hardship constitutes a reasonable cause under Section 80. The Tribunal found that financial difficulty could not be considered a reasonable cause based on previous judgments and upheld the decision of the Commissioner (Appeals).

The Tribunal noted that the Commissioner (Appeals) did not quantify the penalty to be paid and did not consider whether the appellant was eligible for the benefit of Section 73(3) of the Act for paying a substantial amount of service tax before the show cause notice. Consequently, the Tribunal set aside the lower authorities' order and remitted the case back to the adjudicating authority to decide afresh, allowing the appellant to present necessary documents and ensuring a fair hearing before making a new decision.

In conclusion, the Tribunal upheld the decision regarding penalty under Section 76, emphasizing that financial difficulty cannot be considered a reasonable cause for waiving penalties. The case was remitted back to the adjudicating authority for a fresh decision, considering the appellant's claims and providing an opportunity for a fair hearing.