2014 (1) TMI 825 - AT - Service Tax

Penalty for Delay in payment of service tax - sub contractor - Erection, Commissioning and Installation - Invocation u/s 80 - Held that - due to substantial Confusion/ambiguity on the taxability assessee delayed in filing the service tax returns and there was no intention to suppress the fact and evade service tax liability. He also stated that as an honest tax payer, he had discharged the service tax liability including interest before the issue of show-cause notice and requested that the same may be taken into consideration - respondent is a proprietary concern and admittedly, it was the first year of introduction of service tax on the services rendered by him. Having regard to the fact that it is a proprietary concern and the service tax was paid immediately and in respect of almost Rs.2 lakhs, it was the appellant s claim that the contractor had paid the tax and therefore as a subcontractor he was not liable to pay and even in respect of that amount, the appellant had paid the tax without contesting the same, I find that this is a case where the Commissioner (A) has correctly invoked the provision of Section 80 of the Finance Act, 1994 - Decided against Revenue.

Summary

Issues:
1. Appellant's failure to file returns and pay taxes.
2. Imposition of penalties under various sections of Finance Act, 1994.
3. Reasonable cause for waiving penalties.
4. Application of Section 80 of Finance Act, 1994.

Analysis:
1. The Appellant, a service provider, failed to file returns or pay taxes until December 2005 after taking registration in March 2005. The Superintendent In-charge issued a letter demanding tax payment, which the Appellant settled by December 2005 and later. Subsequently, show-cause notices were issued proposing penalties under the Finance Act, 1994.

2. The original adjudicating authority imposed penalties as proposed under various sections of the Finance Act, 1994. On appeal, the Commissioner (A) set aside the penalties invoking Section 80 of the Finance Act, 1994. The Revenue appealed against this decision.

3. The Revenue argued that the Appellant did not show a reasonable cause for waiving penalties under Sections 76, 77, and 78 of the Finance Act, 1994. They contended that the Appellant's delayed tax payment without a valid reason warranted penalty imposition. Citing a High Court decision, the Revenue emphasized that penalties cannot be waived without a reasonable cause.

4. The Tribunal analyzed the case, considering the Appellant's response to the show-cause notice. The Appellant cited substantial confusion on taxability, no intention to evade tax, and prompt tax payment as reasons for the delay. Additionally, the Appellant referenced Tribunal decisions supporting the non-mandatory nature of penalties in certain cases. The Tribunal noted the Appellant's status as a proprietary concern in its first year of service tax introduction, prompt tax payment, and the claim of tax payment by the contractor. Based on these factors, the Tribunal found that the Commissioner (A) correctly applied Section 80 of the Finance Act, 1994, and waived the penalties. The Tribunal rejected the Revenue's appeal, affirming the Commissioner (A)'s decision.

This detailed analysis of the judgment highlights the issues, arguments presented, legal considerations, and the final decision rendered by the Tribunal in a comprehensive manner.