2014 (6) TMI 244 - AT - Service Tax

Penalty for delayed deposit of service tax and interest - services of site formation & Clearance, Excavation & Earthmoving & Demolition services - Held that - correspondence exchanged between the appellant and the Revenue. Its stands very clearly stated by the appellant in their various communications addressed to the jurisdictional Central Excise Officers that the service tax is not being deposited because of the delay occurring for name change in the agreement, the duty liability was accepted by the appellant and was actually deposited alongwith interest even before the issuance of show cause notice. In such scenario, we find no justification for imposition of penalty on the assessee in terms of the provisions of section 80 of the Finance Act, 1944 - Penalty is set aside - Decided in favour of assessee.

Summary

Issues:
1. Service tax liability transfer due to change in ownership.
2. Imposition of penalty under section 76 of the Finance Act.
3. Justification for penalty imposition.
4. Correspondence between the appellant and Revenue.

Analysis:

Issue 1: Service tax liability transfer due to change in ownership
The case involved a situation where a proprietary unit providing services underwent a change in ownership, becoming a private limited company. The old company had applied for a change in the name of the agreement with the client due to the takeover. However, delays in processing the request led to difficulties in depositing the service tax liability under the new company's name.

Issue 2: Imposition of penalty under section 76 of the Finance Act
The appellant had deposited the service tax liability along with interest after delays caused by the change in ownership and name of the company. Subsequently, show cause notices were issued for imposing penalties under section 76 of the Finance Act. The penalties were contested by the appellant, arguing that there was no malafide intention and that the circumstances did not warrant additional penalties.

Issue 3: Justification for penalty imposition
Upon reviewing the correspondence between the appellant and the Revenue, the judges found that the appellant had promptly informed the authorities about the non-deposit of service tax due to the name change delay in the agreement. The appellant had already paid the service tax liability along with interest before the show cause notices were issued. Therefore, the judges concluded that there was no justification for imposing penalties under section 76 of the Finance Act.

Issue 4: Correspondence between the appellant and Revenue
The judges noted the clear communication from the appellant to the jurisdictional Central Excise Officers regarding the reasons for the non-deposit of service tax. The appellant's acceptance of duty liability and timely payment of the service tax along with interest were crucial factors in the decision to set aside the penalty imposed and allow the appeal with consequential relief.

In conclusion, the judgment highlighted the importance of timely communication, genuine efforts to fulfill tax obligations, and the relevance of specific circumstances in determining the imposition of penalties under the Finance Act.