2013 (11) TMI 1253 - AT - Service Tax

Penalty u/s 78 - Benefit of Section 80 - The original authority appeared to had been carried away by the rigour of law while dealing with the assessee s plea for the benefit of Section 80 - Held that - The benefit of Section 80 would accrue to the assessee - The assesse had shown sufficient cause for their defaults Penalty u/s 78 set aside - he had depended on his accountant as he (Managing Partner) was busy pursuing his Ph.D. with since February 2007 - because of his preoccupation with his studies, the Managing Partner depended on his staff members in matters pertaining to payment of service tax - It was also on record that, since he was alerted by the department, he started taking steps like filing of returns, payment of service tax, payment of interest, etc. He managed to pay up all dues before show cause notice was served on him - sufficient cause was shown by the assessee for exoneration from payment of penalty under Section 78 Decided in favor of assesse.

Issues:
Waiver and stay of adjudged dues, demand of service tax and education cesses, appropriating payments, penalties under Sections 77 & 78 of the Act, invocation of Section 80 of the Finance Act, 1994, suppression of material facts, applicability of Section 80, benefit of Section 80, exoneration from penalty under Section 78.

Waiver and Stay of Adjudged Dues:
The appellant filed an application seeking waiver and stay in respect of the adjudged dues. The tribunal, after perusing the records and hearing both sides, found a valid reason for final disposal of the case. The appeal was taken up after dispensing with pre-deposit.

Demand of Service Tax and Education Cesses:
The department issued a show cause notice demanding an amount towards service tax and education cesses for a specific period under the proviso to Section 73(1) of the Finance Act, 1994. The notice also proposed penalties under Sections 77 & 78 of the Act. The Managing Partner of the firm responded to the notice, citing circumstances causing a delay in payment and requesting dropping of penalties. The adjudicating authority confirmed the demands, imposed penalties, and allowed partial payment of penalty within a specified time frame.

Applicability of Section 80 of the Act:
The tribunal noted that the original and appellate authorities did not adequately discuss the applicability of Section 80 to the case. The Managing Partner presented circumstances affecting his ability to comply with tax obligations due to pursuing studies. Despite paying all dues before the show cause notice, the authorities upheld the penalty. The tribunal considered the exceptional circumstances and concluded that the appellant had shown sufficient cause for exoneration from the penalty under Section 78, thus setting aside the penalty.

Suppression of Material Facts:
The tribunal observed that the appellant did not pay service tax on their output service as required and collected service tax from customers but did not remit it to the exchequer. The suppression of material facts by the appellant to evade tax payment was evident, justifying the invocation of the proviso to Section 73(1) by the authorities.

Benefit of Section 80 and Exoneration from Penalty:
Considering the circumstances presented by the appellant, including reliance on staff for tax matters due to academic pursuits, the tribunal concluded that the benefit of Section 80 should accrue to the appellant. The tribunal found that the appellant had shown sufficient cause for their defaults, leading to the setting aside of the penalty under Section 78 while upholding other findings by the lower appellate authority.

Conclusion:
The tribunal allowed the appeal and disposed of the stay application, emphasizing the exoneration from the penalty under Section 78 due to the sufficient cause shown by the appellant. The decision was pronounced and dictated in the open court.

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