2014 (9) TMI 649 - AT - Service Tax

Levy of penalty for late deposit of service tax - simultaneous penalty u/s 76 and 78 - service tax was recovered from the customers - amount was deposited after initiation of inquiry proceedings - Held that - Section 68 makes persons providing taxable services to pay Service Tax at the rates specified under section 66. However section 73A is the relevant section to recover Service Tax in the instant case, and not section 68, Section (73A) stipulates that any amount collected as Service Tax is to be paid to the Government forthwith. This has not been done in this case. Surprisingly, Commissioner (Appeals) confirmed payment of interest but set aside imposition of penalties though for both impositions, same principle applied. A clear reading of sections 76 and 78 reveals that penalty under both the sections is imposable for short payment / non payment of Service Tax. Section 76 is applicable to Any person, liable to pay service tax in accordance with the provisions of section 68 or the rules made under this Chapter, who fails to pay such tax similarly Section 78 is applicable for non payment / short payment of service tax for any contravention of any of the provisions of this Chapter or of the rules made thereunder with intent to evade payment of service tax . The Chapter mentioned in these provisions is Chapter V of the Finance Act, 1994 which also contains Section 73A. Further Service Tax Rules, 1994 framed under section 94 of the Act regarding collection and payment of the Service Tax are also applicable in the matter as these rules also framed under the same Chapter V of the Finance Act, 1994. Regarding simultaneous penalty - Held that - The period involved in the matter is March 2008. It is noted that Section 78 was amended w.e.f. 10.5.2008 to the effect that if penalty is payable under this section, the provisions of section 76 shall not apply . Therefore, after 10.5.08 only, one of these penalties can be imposed at a time. For the period prior to this amendment, it is noted that the matter was rather debatable and different High Courts have interpreted the issue differently. - Respondent is situated in Punjab and therefore judgement pronounced by Punjab and Haryana High Court which is jurisdictional High Court, has to be followed. Accordingly I hold that both these penalties are not imposable simultaneously even prior to amendment on 10.5.2008 in the jurisdiction of Punjab & Haryana High Court. Penalty under section 78 which is equivalent to the amount of Service Tax evaded, is imposable from the Respondent along with interest recoverable under section 75 of the Act.

Summary

Issues:
1. Imposition of penalties under sections 76 and 78 of the Finance Act, 1994 for the recovery of Service Tax under section 73A.

Analysis:
The appeal was filed by the Revenue challenging the Order-in-Appeal dated 21.06.2013. The Respondent had collected Service Tax amounting to a specific sum from a company for professional/liaison services rendered. The initial enquiry was initiated by the Department, and the Respondent paid the Service Tax amount after investigations were conducted against him. The issue revolved around whether penalties under sections 76 and 78 of the Finance Act, 1994 were applicable for the recovery of Service Tax under section 73A. The Commissioner (Appeals) upheld the recovery of Service Tax and interest but dropped the penalties under sections 76 and 78, citing that the service provided became taxable after the period of service. The Revenue contended that penalties were warranted due to deliberate evasion of Service Tax when collected but not paid to the Department.

The Tribunal analyzed the relevant provisions of the Act, particularly sections 73A, 68, 76, and 78. It was established that the Respondent collected Service Tax but did not deposit it until after investigations were initiated. The Tribunal found the Respondent's actions to be willful suppression of facts to evade Service Tax, justifying the imposition of penalties under sections 76 and 78. The Commissioner (Appeals)'s reasoning for setting aside the penalties was deemed unsound, as the collection of Service Tax and non-payment constituted a contravention of the Act.

The Tribunal further clarified that penalties under sections 76 and 78 could be imposed simultaneously for non-payment or short payment of Service Tax. However, the timing of the penalties was crucial, with an amendment on 10.5.2008 stating that only one penalty could be imposed at a time. The Tribunal referenced conflicting High Court judgments on simultaneous imposition but ultimately followed the jurisdictional High Court's ruling. Consequently, it was held that both penalties could not be imposed simultaneously even before the 2008 amendment.

Ultimately, the Tribunal agreed with the Revenue's argument for imposing the penalty under section 78 due to the deliberate evasion of Service Tax by the Respondent. The Commissioner (Appeals)'s order was modified, and the Revenue's appeal was allowed, leading to the imposition of the penalty under section 78 along with interest recoverable under the Act.