2015 (6) TMI 231 - AT - Service Tax

Penalty u/s 78 - Goods Transport Agency service - service tax was not being paid by them on account of financial problems and non-availability of sufficient funds - Held that - Non-payment of duty on account of financial difficulties without intimating the Revenue, especially when the appellant was registered with the department and was aware of its legal obligations, reflected upon malafides of the appellant. The amount of service tax required to be paid for the period of three years was also not on the higher side and as such, the appellant s contention that the same was not paid on account of financial difficulties, can not be appreciated. Further, the appellants have admitted their tax liability and have paid the same for the longer period of limitation. As such, the invocation of longer period itself suggests that there was suppression or misstatement on the part of the assessee for nonpayment of the tax, in which case penal provisions would get attracted. - as the appellants have already deposited the service tax along with interest before the issue of show-cause notice, the penalty imposed under the provisions of Section 78 is required to be brought down to 25% of the tax amount - penalty in terms of Section 78 is set aside - Decided partly in favour of assessee.

Summary

Issues:
- Non-payment of service tax liability by the appellant despite being registered with the service tax department.
- Imposition of penalty under Section 76, 77, and 78 of the Finance Act.
- Applicability of Section 80 of the Finance Act for immunity from penalty.
- Adjudication of penalty by the original adjudicating authority and the Commissioner (Appeals).
- Consideration of financial difficulties as a reason for non-payment of service tax.
- Comparison with a previous Tribunal decision in a similar case.
- Modification of penalty under Section 78 of the Finance Act.

Analysis:
The judgment addresses the issue of the appellant, engaged in cable manufacturing, failing to pay service tax despite registration with the service tax department. The appellant's non-compliance was discovered during an audit, leading to a show-cause notice. The original adjudicating authority refrained from imposing penalties under Sections 76, 77, and 78 of the Finance Act due to the appellant's payment of the outstanding tax amount with interest before the notice. However, the Revenue challenged this decision, leading to an appeal before the Commissioner (Appeals).

The Commissioner (Appeals) found that the appellant had evaded service tax, noting the lack of payment or filing of returns despite registration since 2006. The Commissioner concluded that the appellant's financial difficulties were not communicated to the Revenue, indicating a deliberate attempt to evade tax. As the appellant admitted the liability and paid the tax for an extended period, the Commissioner imposed penalties under Section 76 and 78 of the Finance Act. The judgment also references a previous Tribunal decision to support the imposition of penalties in cases of delayed tax payments.

The Member (J) agreed with the Commissioner (Appeals), emphasizing that the appellant's awareness of tax obligations and delayed payments without notifying the Revenue reflected malafides. The Member (J) cited the Tribunal's decision in a similar case to support the denial of immunity under Section 80 of the Finance Act due to financial difficulties. The judgment upheld the penalty under Section 78 but reduced it to 25% of the tax amount due to the appellant's pre-notice payment. Ultimately, the appeal was rejected, except for the modification in the quantum of penalty under Section 78.