2007 (6) TMI 118 - AT - Service Tax

Appellant (Banking and financial institution) deposited service tax amount at the older (lower) rate resulted in short payment and accordingly penalty imposed u/s 76. The same evident from service tax return. Since there was bonafide reason for short payment of tax, penalty is set aside

Summary

Issues: Imposition of penalty under Section 76 of the Finance Act, 1994 for short payment of tax due to lack of awareness about revised tax rate.

Analysis:
- The appeal challenged the penalty of Rs. 48,800 imposed on the appellant under Section 76 of the Finance Act, 1994 for short payment of tax.
- The appellant, providing financial services subject to service tax, had been complying with the monthly tax payment and half-yearly return filing procedures.
- A show cause notice highlighted that the appellant should have paid tax at the revised rate of 8% from a certain date, instead of the earlier rate of 5%, which led to short payment.
- The appellant's defense was based on lack of awareness about the revised tax rate, stating that immediate payment would have been made if the error was pointed out earlier.
- The appellant also deposited the short paid tax along with interest, emphasizing the inadvertent nature of the short payment.
- The appellant's argument relied on a previous Tribunal decision where it was held that no penalty is warranted for short payment due to genuine reasons, similar to the situation in the present case.
- Section 76 deals with failure to pay tax, but in this instance, there was no intentional failure, only a short payment due to a genuine reason, clearly reflected in the filed return.
- The Tribunal, considering the circumstances and the precedent cited, concluded that no penalty should be imposed in cases of inadvertent short payment due to lack of awareness about revised tax rates.
- Consequently, the penalty was set aside, and the appeal was allowed, emphasizing that no penalty is attracted in such situations.

This detailed analysis of the judgment provides a comprehensive understanding of the issues involved, the arguments presented, and the Tribunal's decision based on legal provisions and precedents.