2015 (10) TMI 2293 - AT - Service Tax

Penalty under Section 76 and 77 of Finance Act, 1994 - Amount of service tax collected from the clients but not deposited - At the instance of Audit party, service tax deposited before issuance of SCN - Appellant states that it had no mala-fide intention to evade tax Further pleads to set aside penalty as appellant is facing financial difficulties Held That - After the audit, fact came into light that appellant received service tax amounts from service receiver but same was not being deposited with Revenue Found no infirmity in imposition of penalty Decided in favour of Revenue.

Summary

Issues:
1. Service tax liability for the period April 2009 to September 2009.
2. Imposition of penalty under Section 76 and Section 77 of the Finance Act, 1994.
3. Justification for penalty imposition.
4. Applicability of penalty provisions under Section 76 of the Finance Act.
5. Dispute over interest as penal in nature.
6. Validity of penalty imposition by the Commissioner.

Analysis:
1. The appellant, registered under "Tour Operators Services," failed to pay service tax amounting to &8377; 51,65,920 for the period April 2009 to September 2009. The appellant acknowledged the liability but attributed the delay to non-payment by their major customer, M/s Kingfisher Airlines. They utilized the received payments for business expenses.

2. Proceedings were initiated for penalties under Section 76 and Section 77 of the Finance Act. The Commissioner imposed penalties of &8377; 200 per day or 2% of service tax under Section 76, and &8377; 1000 under Section 77.

3. The appellant argued no intent to evade tax, as they filed returns reflecting the tax due. The delay was due to financial difficulties caused by non-payment from their client. They sought penalty withdrawal.

4. The respondent contended that using received funds for personal gain warrants penalties under Section 76. Citing a Kerala High Court decision, they argued against leniency for those guilty of suppression.

5. The dispute centered on treating interest as penal and the validity of penalty under Section 76. The appellant's argument against interest as penal was rejected to maintain the effectiveness of penalty provisions.

6. The Tribunal upheld the penalty imposition, finding no grounds for interference due to clear legal violations. The appeal was consequently rejected.

This judgment highlights the importance of timely tax payments and the consequences of using received funds for personal gain. The Tribunal's decision underscores the significance of adhering to tax regulations and the penalties for non-compliance, even in cases of financial difficulties.