2014 (1) TMI 1507 - AT - Service Tax

Imposition of penalty u/s 76, 77 & 78 - Service tax not paid even after date of registration - Held that - Appellant got their registration from the department as provider of taxable serviced on 28.11.2003 and had not filed any statutory returns nor paid any service tax to the department. It was only in December 2005 the appellant started paying service tax alongwith interest. The tabulated chart produced by the appellant shows upto August 2006 there was default in payment of service tax and the same has been paid subsequently though with interest. After August 2006 we find that the service tax was paid by the appellant by due dates regularly - As the appellant after getting the registration as provider of service tax appellant had not paid service tax on due dates prior to August 2006 and also not filed any statutory returns. This happened upto August 2006. As the appellant had not paid service tax nor filed any return, therefore we find no merit in the contention of the appellant that the appellants are not liable for penalties under Section 76 & 77 as imposed under the adjudicating order. In respect of the penalty under Section 78 of the Finance Act, 1994 we find that appellant started paying service tax by dues after August 2006 and prior to this date there was default of Rs.1,26,95,968/-. Therefore, the appellants are liable to penalty - However, appellant had paid part amount of the penalty, the same be adjusted against the above amount of penalty - Decided partly in favour of assessee.

Summary

Issues involved:
Appeal against imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994 for non-payment of service tax on taxable services from October 2002 to March 2007.

Analysis:
1. Imposition of Penalties under Sections 76 & 77:
The appellant challenged the penalties imposed under Sections 76 and 77 of the Finance Act, 1994. The appellant argued that they registered as a service provider on 28.11.2003 and began paying service tax with interest from December 2005, citing unavoidable circumstances for the delay. They claimed that there was no intention to evade tax and provided a chart showing timely payments post-August 2006. However, the authorities found that the appellant had not paid service tax or filed returns before August 2006, leading to the rejection of the appellant's contention. The tribunal upheld the penalties under Sections 76 and 77 due to the appellant's failure to pay tax on time and file statutory returns.

2. Penalty under Section 78:
Regarding the penalty under Section 78 of the Finance Act, 1994, the tribunal noted that the appellant started paying service tax on time only after August 2006, with a significant default amounting to Rs.1,26,95,968 before that date. Consequently, the tribunal held the appellant liable for a penalty of Rs.1,26,05,968 under Section 78. The tribunal directed the adjustment of the penalty amount already paid by the appellant against the total penalty due. The impugned order was modified to reflect this adjustment while confirming the rest of the order.

3. Conclusion:
The tribunal disposed of the appeal by upholding the imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994, except for the modification in the penalty amount under Section 78. The judgment emphasized the importance of timely payment of service tax and filing statutory returns to avoid penalties, even in cases where there may be mitigating circumstances.