2015 (1) TMI 767 - AT - Service Tax

Failure of registration of service - Belated filing of ST-3 Returns - Erection, Commissioning or Installation services - Penalty u/s 77 & 78 - Held that - Appellant paid the entire Service Tax along with interest and intimated the same in the ST-3 returns belatedly filed with the Revenue. The reason given for late payment of Service Tax was accident of their proprietor and also the financial difficulties faced by the appellant. appellant himself paid the entire Service Tax and interest before issue of show cause notice and also intimated the Department by way of filing the required ST-3 returns, though belatedly. The short payment of Service Tax was not detected by the Revenue, therefore, the reasonable cause explained by the advocate, on account of an accident of the proprietor of the appellant and their financial difficulties are justifiable reasons for the purpose of Section 80 of Finance Act, 1994. Accordingly, it is held that no penalty under Section 78 of the Finance Act, 1994 is imposable upon the appellant by virtue of proviso of Section 80 of Finance Act, 1994 - Decided in favour of assessee.

Summary

Issues:
Penalty imposition under Section 77 & 78 of Finance Act, 1994 for delayed filing of ST-3 returns and payment of Service Tax.

Analysis:
The appellant provided taxable services falling under Erection, Commissioning, or Installation services and Management, Maintenance & Repair services. The appellant failed to register the latter category of service with the Department and belatedly filed ST-3 returns for October 2007 to March 2008, paying Service Tax and interest. Subsequently, penalties under Section 77 & 78 of Finance Act, 1994 were imposed after a show cause notice by the Revenue. The first appellate authority upheld the penalties, leading to the appellant's appeal.

The appellant's representative argued that the delay in filing returns and paying Service Tax was due to the proprietor's accident and financial difficulties. They contended that penalties were not applicable under Section 80 of Finance Act, 1994, citing a judgment by CESTAT Delhi in a similar case. On the other hand, the Revenue argued for penalty imposition based on a judgment by CESTAT Chennai in another case.

After hearing both sides and examining the case records, it was noted that the appellant paid the full Service Tax and interest before the show cause notice, citing the proprietor's accident and financial constraints as reasons for the delay. The judgment by CESTAT Chennai was a single-member decision, while the CESTAT Delhi judgment was a two-member decision, favoring the appellant's position. As the Revenue did not detect the short payment of Service Tax, the reasons provided by the appellant were considered valid under Section 80 of Finance Act, 1994. Consequently, no penalty under Section 78 was deemed applicable due to the proviso of Section 80.

In conclusion, the appellant's appeal was allowed, granting them the benefit of Section 80 of the Finance Act, 1994.