2015 (8) TMI 796 - AT - Service Tax

Penalty u/s 77 & 78 - assessee neither obtained registration for providing taxable services during the initial period nor remitted the service tax on commercial or industrial construction service and w.e.f. 01.06.2007 on works contract service - Held that - assessee had provided the taxable services of CICS or WCS during 2006-2007 to 2010-2011 but failed to obtain registration and remit any service tax, till 10.03.2010 - The remittances should be considered in the context of the fact that the assessee obtained registration for rendition of CICS on 26.06.2009 and for WCS on 30.03.2010. Clearly therefore and certainly from 26.03.2009, the appellant must be presumed to have knowledge of being the provider of taxable services liable to remit service tax on the consideration received therefor. The failure of the assessee to remit service tax even immediately after obtaining service tax registration for CICS on 26.03.2009 therefore leads to the clear presumption of conscious knowledge of the liability to tax and of the failure to remit the tax with an intent to evade the same, in violation of the provisions of the Act. Even prior to 26.03.2009, on a plain reading of the provisions of Section 65(25b) of the Act the assessee cannot claim to have been under any doubt as to having provided the specified taxable service. The unambiguous provisions of Section 65(25b); the fact of the assessee having obtained registration for rendition of CICS on 26.06.2009 but failing to remit any tax till 10.03.2009 and that too in instalments and at the assessee s own convenience, without any justification pleaded for failure to remit the service tax and interest due immediately after 26.06.2009, leads to but one inference, namely that the assessee had consciously failed to obtain registration, file returns or remit the service tax due. - in view of the provisions of sub-section (4) imposition of penalties under Sections 77 and 78 cannot be avoided. The impugned order passed by the Commissioner (Appeals) is therefore unsustainable. - Decided in favour of Revenue.

Summary

Issues:
- Appeal against lifting of penalty under Sections 77 and 78 of the Finance Act, 1994
- Allegations of non-registration, non-remittance of service tax, and suppression of facts
- Interpretation of Sections 73(3) and 73(4) of the Act
- Imposition of penalties under Sections 77 and 78
- Application of the second proviso to Section 78 regarding penalty amount

Analysis:

The judgment involves an appeal against the lifting of penalties under Sections 77 and 78 of the Finance Act, 1994. The case revolves around allegations of non-registration, non-remittance of service tax, and suppression of facts by the respondent-assessee. The Anti Evasion Branch discovered the non-remittance of service tax by the assessee, leading to a show cause notice being issued. The primary adjudication order confirmed the demand of service tax, imposed penalties under Sections 77 and 78, and ordered appropriation of the deposited amount.

The appellate authority partially allowed the appeal, citing the assessee's timely remittance of service tax and lack of knowledge about tax liability as reasons. However, the Revenue contended that the assessee's actions constituted a violation of the Act, necessitating penalties under Sections 77 and 78. The interpretation of Sections 73(3) and 73(4) regarding non-payment or short payment of service tax due to fraud or suppression of facts was crucial in this case.

The judgment highlighted the assessee's conscious knowledge of tax liability despite delayed registration and sporadic remittances. The court emphasized the importance of compliance and rejected the assessee's claim of ignorance. Legal principles such as "Ignorancia juris non excusat" were invoked to stress the assessee's responsibility to adhere to tax laws. Precedents were cited to support the necessity of positive evidence indicating fraud or intent to evade tax for penalty imposition.

Ultimately, the court found the imposition of penalties under Sections 77 and 78 unavoidable based on the facts of the case. The application of the second proviso to Section 78 was discussed, clarifying that 25% of the penalty amount must be remitted by the assessee. The judgment allowed the Revenue's appeal, setting aside the penalties dropped by the appellate authority and emphasizing the importance of penalty remittance.