2014 (1) TMI 1252 - AT - Service Tax

Commercial Coaching and Training Institutes - Period of service is before, 1.7.2003 - Held that - as the taxable service is provided after 1.7.2003 and the payments were received in respect of the taxable service which is provided after 1.7.2003 - service tax liability arises on which the taxable service is provided and not on the date of consideration amount is received - Following decision of Sudesh Sharma vs. CCE. Ludhiana 2009 (9) TMI 529 - CESTAT, NEW DELHI - Decided against assessee. Statutory interest is to be paid by the assessee when the taxable amount is not paid by due date. Penalty u/s 76, 77 & 78 - Applicability of Section 80 - Held that - service tax is introduced in respect of Coaching and Commercial Institutes with effect from 1.7.2003 and the demand is for the initial period and the assessee had not paid the service tax on the belief that the consideration amounts were received prior to 1.7.2003. As the period relates to initial period, we find that it is not a case for imposition of any penalty as per Section 80 of the Finance Act, 1994 wherein it is provided that notwithstanding anything contained in the provisions of section 76, section 77 1 or section 78 no penalty shall be imposable on the assessee for any failure referred to in the said provisions, if the assessee proves that there was reasonable cause for the said failure - Decided in favour of assessee.

Summary

Issues involved:
1. Absence of the assessee during the hearing.
2. Imposition of penalty and demand of interest.
3. Applicability of service tax on consideration received before the imposition date.
4. Interpretation of service tax liability based on the date of taxable service provision.
5. Statutory interest payment on delayed tax payment.
6. Imposition of penalty for failure to pay service tax during the initial period.

Absence of the assessee during the hearing:
The judgment notes that despite multiple notices, the assessee, M/s Chate Coaching Classes Pvt. Ltd, did not appear during the hearing. As a result, the appeals were considered for disposal in the absence of the Respondents.

Imposition of penalty and demand of interest:
The Revenue filed an appeal against the impugned order that set aside the penalty and interest. The Tribunal found that the demand for interest was valid as statutory interest is required to be paid when the taxable amount is not paid by the due date. Citing a Supreme Court case, the Tribunal upheld the payment of interest in case of delayed tax payment. However, in terms of penalty, the Tribunal ruled that no penalty should be imposed for the initial period as per Section 80 of the Finance Act, 1994, if the assessee proves reasonable cause for the failure to pay.

Applicability of service tax on consideration received before the imposition date:
The assessee argued that since the consideration amounts were received before the imposition of service tax on Commercial Coaching and Training Institutes, the demand for tax was not sustainable. However, the Revenue relied on Tribunal decisions stating that service tax liability arises when the taxable service is provided, not when the consideration amount is received. The Tribunal dismissed the appeal, emphasizing that the taxable service was provided after the imposition date, making the demand valid.

Interpretation of service tax liability based on the date of taxable service provision:
The Tribunal, based on precedents, concluded that the taxable service being provided after the imposition date, and payments being received in relation to that service, justified the imposition of service tax. Relying on Tribunal decisions, the Tribunal found no merit in the assessee's argument regarding the timing of consideration amounts received.

Statutory interest payment on delayed tax payment:
The Tribunal upheld the payment of interest by the assessee for delayed tax payment, citing a Supreme Court case that established the requirement for statutory interest to be paid in case of tax payment after the due date. The impugned order setting aside the interest payment was deemed unsustainable.

Imposition of penalty for failure to pay service tax during the initial period:
Regarding the penalty, the Tribunal noted that the service tax was introduced for Coaching and Commercial Institutes from a specific date. As the demand was for the initial period and the assessee had not paid the service tax due to a belief about the timing of consideration amounts, the Tribunal found no grounds for imposing a penalty. Referring to Section 80 of the Finance Act, 1994, the Tribunal disallowed the Revenue's appeal on penalty but upheld the liability for interest payment by the assessee.