2016 (1) TMI 674 - HC - Service Tax

Condonation of delay in appeal before First appellate authority - Levy of penalty where service tax and interest has been paid earlier - bonafide belief - Held that - With regard to service tax liability as well as levy of penalty, an order had been passed which was questioned by the petitioner before the Appellate Authority with the delay of 128 days. Since there was no power vested, the Appellate Authority refused to condone the delay in filing the appeal and dismissed the same. Hence, the order of the Appellate Authority does not suffer from any legal infirmity. At the same time, considering the specific circumstances and also the fact that the tax as well as interest had already been paid, and the petitioner confined his prayer to penalty alone, this Court is inclined to direct the Appellate Authority to look into the issue afresh and pass appropriate order on merits after hearing the petitioner. Such an exercise shall be completed, within a period of 4 weeks, from the date of receipt of a copy of this order. - Matter remanded back.

Summary

Issues:
1. Delay in filing appeal before the Appellate Authority.
2. Imposition of penalty for failure to pay service tax.
3. Request to quash the order of the Commissioner and direct the Appellate Authority to reconsider the penalty.

Analysis:
Issue 1: The petitioner sought to quash the order of the 1st respondent/Commissioner (Appeals-I) dated 01.07.2015 and requested the 1st respondent to condone the delay of 128 days on medical grounds in filing the appeal. The petitioner argued that the delay was due to being unaware of the service tax liability on maintenance and repair services. Despite paying the service tax liability along with interest, the Appellate Authority dismissed the appeal on the grounds of delay.

Issue 2: The Senior Standing counsel contended that the levy of penalty was automatic once the petitioner failed to file appropriate returns, and there was no justifiable reason to question the imposition of the penalty. The court considered both arguments and noted that the Appellate Authority refused to condone the delay in filing the appeal, upholding the penalty imposition due to the failure to pay service tax.

Issue 3: The court acknowledged that the Appellate Authority's order did not have any legal infirmity, as it lacked the power to condone the delay in filing the appeal. However, considering the circumstances where the tax and interest had already been paid, the court directed the Appellate Authority to review the penalty issue afresh and pass an appropriate order on merits after hearing the petitioner. The court instructed the Appellate Authority to complete this review within four weeks from the date of receipt of the court's order.

In conclusion, the writ petition was disposed of without costs, and the connected miscellaneous petition was closed. The court's decision allowed the petitioner to have the penalty issue reconsidered by the Appellate Authority, emphasizing a fresh review of the penalty imposition in light of the circumstances presented during the case.