2015 (10) TMI 228 - AT - Service Tax

Air Travel Agency Services - Penalty u/s 76, 77 & 78 - Held that - Demand of service tax and payment thereof, interest and penalty under Sections 76 and 77 are not the subject matter of the appeal. The Revenue is only contesting the setting aside the penalty under Section 78 by the learned Commissioner (Appeals) - there is sufficient cause to set aside the penalty under Section 78 which is provided under Section 80 of the Finance Act, 1994. Therefore, in my considered view, the learned Commissioner (Appeals) has rightly exercised the power vested in him for setting aside the penalty imposed under Section 78. It is also a fact that the respondent have themselves suo motu deposited the service tax amount. The respondent also declared part of the taxable value in their ST-3 returns. The show cause notice was issued within the normal period of one year. Taking into consideration all these facts I am of the considered view that the penalty under Section 78 was correctly set aside - Decided against Revenue.

Summary

Issues:
Appeal against penalties under Sections 76 and 77 while dropping penalty under Section 78.

Analysis:
The case involves a respondent providing Air Travel Agency Services who failed to file ST-3 return for a specific period, leading to a show cause notice for non-payment of service tax. The Order-in-Original confirmed the tax liability along with penalties under Sections 76, 77, and 78. The Commissioner (Appeals) upheld the demand but set aside the penalty under Section 78, prompting the Revenue to appeal.

The Revenue argued that the respondent's actions, including collecting service tax from customers but not remitting it to the government, showed an intent to evade payment, justifying penalty under Section 78. The respondent's delay in filing returns and partial payment of tax further supported the Revenue's stance.

Despite notice, the respondent did not appear before the Tribunal. The Tribunal reviewed the case, focusing on the appeal against the penalty under Section 78. The Commissioner (Appeals) noted the respondent's financial difficulties but emphasized their failure to fully clear the tax liability and comply with filing requirements, justifying penalties under Sections 76 and 77. However, the Commissioner found no basis for penalty under Section 78 as the respondent had voluntarily disclosed the tax liability.

The Tribunal concurred with the Commissioner's decision, noting that the respondent had proactively paid part of the tax, declared taxable value, and the show cause notice was issued within the statutory period. Consequently, the Tribunal upheld the decision to set aside the penalty under Section 78, as per the provisions of Section 80 of the Finance Act, 1994.

Ultimately, the Tribunal dismissed the Revenue's appeal, affirming the Commissioner (Appeals) decision to drop the penalty under Section 78 while upholding the tax liability and penalties under Sections 76 and 77.