2015 (9) TMI 684 - AT - Service Tax

Imposition of penalty - Delay in filing returns - Held that - Rule 7C read with first proviso makes it abundantly clear that the maximum penalty that can be imposed under the said Rule is the one prescribed under Section 70. During the impugned period i.e. April 2008 to March 2011 the maximum penalty that could be imposed under Section 70 was ₹ 2,000/-. Therefore, in respect of six returns, the maximum penalty that could have been imposed was only ₹ 12,000/- and not more than that amount. Since one return has been filed in time, penalty is liable only on five returns and thus the total liability to penalty is only ₹ 10,000/-. Inasmuch as the appellant has paid the said amount, there is no further liability to penalty. - Penalty is upheld - Late fees is set aside - Decided partly in favour of assessee.

Summary

Issues:
Confirmation of penalty for delayed filing of service tax returns under Rule 7C of the Service Tax Rules, 1994.

Analysis:
The appeal challenged the Order-in-Appeal confirming a penalty of Rs. 1,01,500 imposed on the appellant for delayed filing of service tax returns. The appellant argued that they delayed filing due to exporting services and not having to make payments domestically. The department issued notices for non-filing of returns, imposing penalties under Section 77 of the Finance Act, 1994. The appellant contended that the late fee imposed exceeded the cap specified in Section 70, which limited penalties to Rs. 2,000 per return. The impugned order imposed a late fee of Rs. 1,01,500, whereas the appellant had already paid Rs. 10,000 under Section 77 and filed one return on time.

The Revenue argued that the late fee imposed was within the permissible limit under Rule 7C, set at Rs. 20,000 per return effective from 08/04/2011. However, the Tribunal analyzed Rule 7C along with the first proviso, clarifying that the maximum penalty under the rule could not exceed that prescribed in Section 70. During the relevant period, the maximum penalty under Section 70 was Rs. 2,000 per return, totaling Rs. 12,000 for six returns. As one return was filed on time, the penalty was applicable to only five returns, amounting to Rs. 10,000. Since the appellant had already paid this amount, there was no further liability for penalty.

In conclusion, the Tribunal upheld the penalty of Rs. 10,000 under Section 77 but set aside the late fee imposed under Rule 7C of the Service Tax Rules, 1994.