2014 (1) TMI 205 - AT - Service Tax

Demand of service tax - Delay in payment of service tax - Penalty u/s 76 & 77 - Held that - there has been a delay in payment of service tax. However, the appellant has paid entire amount of tax before issue of show cause notice. Out of total amount of Rs.17,000/- due as interest, an amount of about Rs.5192/- was paid. Only 12,968/- was paid subsequent to issue of SCN. Considering the provisions of section 73 the Show Cause Notice Should have been issued for recovery of amount short paid only. Considering this aspect Penalty imposed is disproportionate to the facts of this case and therefore penalty is reduced considering the amount of interest which was not paid before issue of SCN - Decided partly in favour of assessee.

Issues:
1. Delay in payment of service tax leading to imposition of penalty under sections 76 and 77 of the Finance Act, 1994.
2. Appeal against the penalty imposed by the adjudicating authority and subsequent reduction by the Commissioner (Appeals).
3. Request for waiver of penalty based on circumstances leading to the delay in payment.

Analysis:
1. The applicant provided photography services during a specific period but did not promptly pay the service tax as per the prescribed schedule, leading to a delay in payment and filing of returns. The Revenue issued a show cause notice for imposing a penalty under sections 76 and 77 of the Finance Act, 1994. The penalty was initially set at Rs.1,95,791 for the delay in payment. However, the appellant paid the service tax before the issuance of the show cause notice, except for a small amount. The Commissioner (Appeals) later reduced the penalty to Rs.50,000, prompting the appellant to file an appeal seeking further waiver of the imposed penalty.

2. The appellant's advocate argued that the delay in payment was due to financial constraints and personal reasons, such as the death of the Managing Director's brother, which affected the timely settlement of dues. The appellant contended that penalties should only apply to the amount short paid before the show cause notice and that, considering all circumstances, the penalty under section 76 should be waived.

3. The Revenue's representative opposed the appellant's plea for penalty waiver, stating that the Commissioner (Appeals) had thoroughly reviewed the case and found that the appellant was operating the business and setting up a new unit during the relevant period. The Commissioner (Appeals) had not imposed the full penalty as prescribed under section 76 due to its excessive nature compared to the tax amount payable. The Revenue argued that the reduced penalty of Rs.50,000 should be upheld.

4. Upon considering both sides' arguments, the judge acknowledged the delay in service tax payment but noted that the appellant had settled the entire tax amount before the show cause notice issuance. The judge highlighted that the show cause notice should have been issued only for the recovery of the short-paid amount. Consequently, the judge deemed the initially imposed penalty as disproportionate to the case's circumstances and reduced the penalty amount to Rs.12,500, considering the interest not paid before the show cause notice. The appeal was partially allowed, reflecting a balanced approach to penalty imposition in light of the specific facts of the case.

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