2015 (4) TMI 532 - AT - Service Tax

Commercial or Industrial Construction service - penalty under section 76, 77 and 78 - Held that - Appellant is not disputing the levy of service tax and payment thereof alongwith interest and they also not disputed the penalty of 25% under Section 78 and penalty of ₹ 10,000/- imposed for non obtaining the service tax registration. From the facts I find that the appellant admittedly paid service tax and interest before issuance of show cause notice and 25% penalty within the stipulated time period of 1 month - quantum of penalty i.e. ₹ 20,000/- is not a fixed amount of penalty provided for not filing the return. The amount of the said penalty is not mandatory. Considering the quantum of the penalty and overall facts and circumstances of the case, I am of the view that appellant certainly deserve for relief in the penalty imposed by the lower authority - Decided partly in favour of assessee.

Summary

Issues:
1. Challenge to imposition of penalties under Sections 77, 78, and 70 for non-payment and non-filing of service tax returns.
2. Dispute regarding the intention behind non-payment of service tax.
3. Interpretation of penalty provisions under Section 70 of the Finance Act, 1994.

Analysis:
1. The appeal challenged the penalties imposed under Sections 77, 78, and 70 for non-payment and non-filing of service tax returns. The appellant, engaged in taxable services related to Commercial or Industrial Construction, received payments from a government undertaking. The adjudicating authority confirmed a service tax demand, penalties under various sections, and interest. The appellant disputed the penalties and appealed before the Commissioner (Appeals), who upheld the penalties. The appellant contended that they had no malicious intent in non-payment, had paid the service tax and interest before the show cause notice, and had paid a portion of the penalty promptly. The appellant argued that penalties under Sections 77, 78, and 70 were unjustified. The Revenue supported the penalties, citing non-compliance with return filing requirements under Section 70.

2. The appellant argued that their non-payment was not intentional, especially as they were providing services to a government undertaking with records available. They believed their road construction services were not taxable. The appellant highlighted their prompt payment of service tax, interest, and a portion of the penalty upon receiving the adjudication order. They explained the delay in filing returns was due to obtaining service tax registration, and all periods were disclosed in the subsequent returns. The appellant's counsel emphasized the bonafide nature of their actions, citing a relevant judgment.

3. The Tribunal analyzed the penalty provision under Section 70, which mandates the filing of returns by persons liable to pay service tax. The Tribunal noted that the penalty amount specified in the section was not fixed and considered the circumstances of the case. While upholding the service tax and interest payments, the Tribunal found the penalty under Section 70 excessive given the appellant's compliance and reduced it from &8377; 1,60,000 to &8377; 50,000. The Tribunal's decision was based on the discretionary nature of the penalty amount and the overall facts of the case. The appeal was partly allowed, granting relief in the penalty amount imposed under Section 70.

This detailed analysis of the legal judgment addresses the issues raised in the appeal, the arguments presented by both parties, and the Tribunal's decision regarding the penalties imposed under various sections of the Finance Act, 1994.