2014 (7) TMI 937 - AT - Service Tax

Waiver of penalty u/s 80 - Penalty levied u/s 77 & 78 - delayed payment of service tax - Dry cleaning service - Held that - The statutory levies cannot be obviated for so long merely because the computer was down. Further, even if the computer was down, the appellant could have filed the return manually and paid service tax by comuting the same manually as the total number of invoices involved during the entire period were less than 50. Further even if their untenable argument is considered for a moment, being aware that they have not paid service tax due and not filed statutory ST-3 returns for so long, if their bonafides were above board, they should / wouldhave atleast informed the department about it. It was only when the raid was conducted and they were caught that they admitted their violations. - penalty could not be waived - Decided against assessee.

Summary

Issues:
Imposition of penalty under Sections 77 and 78 of the Finance Act, 1994 for non-filing of ST-3 returns and non-payment of service tax from April 2004 to December 2005.

Analysis:

1. Imposition of Penalty under Sections 77 and 78:
The appellants appealed against the penalty imposed under Sections 77 and 78 of the Finance Act, 1994 for failure to file ST-3 returns and pay service tax. The appellants argued that their inability to file returns and pay tax was due to their computer being down, despite being registered with the Central Excise Department since 2002. The original adjudicating authority did not impose penalty under Section 76, citing Section 80 of the Act. The defense contended that the penalty under Section 76 was not imposed to avoid double penalty due to the penalty under Section 78. The Tribunal noted that the appellants' claim of computer issues for over a year was unreasonable, especially since they could have filed returns manually for the limited number of invoices. Additionally, the appellants did not inform the department of their non-compliance until caught during a raid, indicating lack of bona fides. The Tribunal found the grounds for invoking Section 78 penalties valid and upheld the penalty of Rs. 1000 under Section 77. The appeal against the penalty was dismissed.

2. Consideration of Section 80 and Double Penalty:
The Tribunal analyzed the original order and the appeal order to determine the consideration of Section 80 for not imposing penalty under Section 76. It was observed that while Section 80 was mentioned in the order, it was not a basis for not imposing penalty under Section 76. The Tribunal clarified that penalty under Section 76 was not imposed to avoid double penalty in light of the penalty under Section 78. The Tribunal found that the mention of Section 80 was an inadvertent error with no substantive impact on the penalty imposition. The judgment cited supported the view that penalty under Section 76 was not imposed due to the penalty under Section 78, and not because of Section 80. Therefore, the Tribunal concluded that the penalty under Section 76 was rightly not imposed in this case.

3. Non-compliance and Awareness of Tax Liability:
The Tribunal addressed the appellants' claim of non-compliance due to computer issues and highlighted the unreasonableness of such a prolonged excuse for not filing returns and paying tax. The Tribunal emphasized that statutory obligations cannot be evaded for an extended period merely due to technical difficulties. Furthermore, the appellants' failure to proactively address their non-compliance until discovered during a raid indicated a lack of transparency and good faith. The Tribunal noted that the appellants did not deny awareness of their tax liability, strengthening the case for imposing penalties under Sections 77 and 78. The Tribunal found no deficiencies in the impugned order and upheld the penalties imposed.

In conclusion, the Appellate Tribunal upheld the imposition of penalties under Sections 77 and 78 of the Finance Act, 1994, dismissing the appeal against the penalties for non-filing of ST-3 returns and non-payment of service tax from April 2004 to December 2005. The Tribunal rejected the appellants' claims of computer issues as a valid excuse and emphasized the importance of compliance with statutory obligations and transparency in tax matters.