2013 (12) TMI 1120 - AT - Service Tax

Waiver of Penalty u/s 80 as imposed u/s 76 & 78 - Demand of service tax - Construction of residential complexes - Adjudicating authority reduced penalty u/s 78 and set aside penalty u/s 76 - Held that - assessee is a small scale service provider and it is obvious from the records that he did not get registered and discharge Service tax liability as he was not aware of the provisions of law. As soon as the omission on his part was brought to his notice, he discharged the Service tax liability. For the year 2007-08 he discharged the duty liability in March, 2009 and for the period 2008-09 he discharged the liability in August, 2009 in respect of demand. He also discharged liability of interest in March 2009 itself - Therefore, it was a fit case for waiver of penalty under Section 80 of the said Finance Act which the adjudicating authority failed to do by taking into consideration the facts of the case which the appellate authority has done. He reduced the amount of penalty to the extent to Service tax paid by the respondent assessee. At least the appellate authority has exercised the discretion to some extent even though he could have waived the entire penalty under Section 80 of the Finance Act, 1994 which provides for complete waiver of penalty when there was a reasonable cause for failure on assessee s part in non payment of Service Tax - Decided against Revenue.

Summary

Issues:
Departmental appeal against reduction of penalty under Sections 76 and 78 of the Finance Act, 1994 by the Commissioner (Appeals).

Analysis:
The case involved a departmental appeal against the reduction of penalty under Sections 76 and 78 of the Finance Act, 1994 by the Commissioner (Appeals). The respondent was engaged in providing taxable services related to the construction of residential complexes. An inquiry revealed that the respondent had not discharged the Service tax liability for the years 2007-08 and 2008-09. The duty liability was determined, and the respondent paid the outstanding amount along with interest. A show-cause notice was issued, leading to the confirmation of the Service tax demand, interest, and imposition of penalties by the adjudicating authority. The respondent appealed the decision, resulting in the appellate authority upholding the demand but reducing the penalty under Section 78, which had already been paid by the respondent. The penalty under Section 76 was set aside by the appellate authority on the grounds that penalties under both Sections 76 and 78 could not be imposed after 10-5-2008.

The department contended that the reduction of penalty by the Commissioner (Appeals) was erroneous as penalties under both Sections 76 and 78 were imposable for the period before 10-5-2008. The department argued that since the respondent only paid the Service tax liability after detection by the department, Section 73(3) of the Finance Act, 1994 was not applicable. However, the Tribunal considered the submissions and noted that the respondent, being a small-scale service provider, had not registered or discharged the Service tax liability due to ignorance of the law. The respondent promptly paid the outstanding amounts once notified by the authorities. The Tribunal found that the case did not involve fraud, collusion, or wilful misstatement, but rather a lack of awareness and non-observance of procedures. It was deemed a fit case for the waiver of penalty under Section 80 of the Finance Act, which the adjudicating authority failed to consider but was appropriately addressed by the appellate authority. The Tribunal upheld the reduction of penalty by the Commissioner (Appeals) and dismissed the department's appeal, stating that there was no merit in the appeal.

In conclusion, the Tribunal found that the reduction of penalty by the Commissioner (Appeals) was justified given the circumstances of the case, where the respondent's non-compliance was due to ignorance rather than deliberate evasion. The Tribunal emphasized the importance of considering the facts and circumstances of each case, especially when dealing with small-scale service providers who may lack awareness of their legal obligations.