2007 (7) TMI 111 - AT - Service Tax

Penalty (Service tax) - appellant view is non-availability of fund due to large debtors but penalty enhanced on the ground of late payment of service tax by appellant without having any suitable reason - Matter remitted to OA for fresh consideration

Summary

Issues:
1. Enhancement of penalty amount under Sec. 76 of the Finance Act by the Commissioner of Central Excise and Customs.
2. Disagreement on reasons for late payment of service tax and late filing of returns.
3. Interpretation of Rule 6 of the Service Tax Rules 1994 regarding payment of service tax.
4. Dispute over the receipt of service charges and the due dates for payment of service tax.
5. Consideration of waiver of penalty amount under Sec. 80 based on reasonable cause.

Analysis:
1. The appeal concerns the enhancement of the penalty amount under Sec. 76 of the Finance Act by the Commissioner of Central Excise and Customs from Rs. 4,000 to Rs. 1,04,658. The Commissioner disagreed with the reasons provided by the assessee for late payment of service tax and late filing of returns, finding them unsatisfactory. The Commissioner cited the lack of proper reasons within the meaning of Sec. 80 to establish a reasonable cause for the failures.

2. The assessee argued that the delay in payment of service tax was due to non-availability of funds and non-receipt of payments from major corporate customers during the relevant period. The contention was that the financial constraints led to the failure to pay the service tax promptly. However, the Commissioner found this explanation inadequate and upheld the enhanced penalty amount.

3. The dispute involved the interpretation of Rule 6 of the Service Tax Rules 1994, which stipulates the payment of service tax on taxable services received during a calendar month by the 25th of the following month. The Judicial Department Representative (JDR) argued that service tax becomes due upon receipt of service charges by the assessee, regardless of the payment date mentioned in the rule.

4. A key point of contention was the receipt of service charges and the corresponding due dates for payment of service tax. The JDR presented a chart indicating that the service tax was received before the due dates, implying prompt payment was feasible. The assessee disputed this claim, citing evidence of delayed receipt of payments beyond the due dates mentioned in the chart. This discrepancy was not addressed in the previous orders.

5. Regarding the waiver of penalty under Sec. 80, the assessee sought complete waiver based on the reasonable cause of non-availability of funds due to delayed payments from corporate customers. The argument was that this circumstance warranted leniency, which was not considered by the authorities. The Tribunal remanded the matter to the original adjudicating authority for a fresh decision, instructing a review of the evidence, bills, and vouchers to determine the delay, if any, in service tax payment.

In conclusion, the appellate tribunal allowed the appeal for remand, emphasizing the need for a thorough examination of the reasons for the delayed payment of service tax and the possibility of waiving the penalty amount under Sec. 80 based on the presented evidence and circumstances.