2015 (8) TMI 795 - AT - Service Tax

Penalty u/s 78 - Construction of Residential Complexes service - Failure to register under service tax - Held that - It is the case where the appellants have already paid the entire demand along with interest and the same was appropriated in the OIO. The appellant contended that they have paid the entire duty and the interest before issue of show cause notice and pleaded for waiver of penalty. It is not the case of the appellants that they have voluntarily paid the service tax on their own. - since the appellants have not even registered with the department under service tax and not filing returns in spite of knowing fully well that the they had already collected the total amount from their clients. The appellants therefore failed to obtain registration and but for the detection by the Department theycould not have discharged service tax. The appellants cannot plead for innocence for invoking Section 80. There are number of Tribunals and High Courts decisions where Section 78 penalty/under Section 11AC penalty were upheld, where there is a deliberate suppression of the facts proved with an intention to evade service tax. No justification on the appellant s plea for waiver of penalty imposed under Section 78 - Decision in the case of Kedia Business Centre Vs. CCE, Mumbai 2009 (3) TMI 85 - CESTAT MUMBAI followed - Decided against assessee.

Summary

Issues:
Appeal against penalty under Section 78 of the Finance Act.

Analysis:
The appellant provided taxable services for 'Construction of Residential Complexes' but failed to register under service tax and pay the tax collected from clients. The Preventive Unit of Coimbatore Commissionerate issued a show cause notice demanding service tax of Rs. 5,91,192 for the period 01.04.06 to 31.12.06. The adjudicating authority confirmed the demand, appropriated Rs. 5,99,954 towards service tax, educational cess, and interest, and imposed penalties under Sections 76, 77, and 78 of the Finance Act. The Commissioner (Appeals) partially allowed the appeal, setting aside penalties under Sections 76 and 77 but upholding the demand, interest, and penalty under Section 78.

The appellant argued that they registered and paid the tax after receiving a department letter, claiming they believed service tax was not payable and had no intention to evade tax. They sought waiver of the penalty under Section 78, citing relevant case laws. The Revenue contended that the appellant deliberately suppressed the tax collected and could not have evaded tax without detection. They referenced decisions supporting the penalties imposed.

The Tribunal noted that the appeal focused on waiving the penalty under Section 78. The appellant paid the demand and interest before the show cause notice, but not voluntarily. As the appellant did not register or file returns despite collecting tax from clients, the Tribunal found no innocence to invoke Section 80. Citing precedents, including the case of Kedia Business Centre, the Tribunal held that penalties can be imposed for deliberate tax evasion. The Tribunal rejected the appellant's plea for waiving the penalty under Section 78, considering the established suppression of facts and delayed tax payment.

In conclusion, the Tribunal upheld the impugned order, rejecting the appeal against the penalty under Section 78. The penalties under Sections 76 and 77 were already waived, and no infirmity was found in upholding the penalty under Section 78. The decision was pronounced in open court on 17.03.2015.