2018 (12) TMI 1736 - AT - Service Tax

Tax collected but not deposited in the government exchequer - recovery alongwith interest and penalty - HELD THAT - It is seen from the records that the office of the appellant has admitted that service tax had been collected along with inspection fees as agreed upon in the tender documents. It is, therefore, a clear case of non-deposit of service tax component collected in the various invoices. The tender process makes it clear that the payment of inspection fees also must comply with the provisions of Finance Act, 1994 and, thereby, includes the service tax component. Implicitly, service tax component had been collected and this must be deposited. It is the responsibility of every provider of service to deposit the amounts collected as service tax, irrespective of whether the service provided is taxable or not, with the exchequer. Failure to do so must result in recovery of that amount. It is seen that the appellant is a department of the government of Maharashtra concerned with the erection and maintenance of dams. Owing to the lack of understanding and absence of motive, imposition of penalty under section 78 of Finance Act, 1994 will not sustain - penalty set aside - appeal allowed in part.

Summary

Issues:
1. Tax collection under Finance Act, 1994 not deposited in government exchequer.
2. Imposition of penalty under sections 77 and 78 of Finance Act, 1994.

Analysis:
Issue 1: The appeal pertains to The Executive Engineering, Chief Gate Erection Unit No.2, Nagpur challenging the order confirming the demand of tax collected under the Finance Act, 1994 but not deposited in the government exchequer. The appellant, a department of the Government of Maharashtra fabricating and erecting gates, was found to have collected inspection charges along with tax from outside manufacturers but failed to deposit the tax with the Government of India. The appellant contended that the activity was not a taxable service, but evidence showed that service tax had indeed been collected along with inspection fees as per the tender documents. The tribunal noted that the service tax component collected must be deposited with the exchequer as per the Finance Act, 1994, regardless of the taxable nature of the service provided. Consequently, the failure to deposit the collected service tax amount warranted recovery.

Issue 2: The tribunal considered the imposition of penalties under sections 77 and 78 of the Finance Act, 1994. Despite the appellant being a department of the government of Maharashtra involved in dam erection and maintenance, the tribunal found that due to a lack of understanding and absence of malafide intent, the penalty under section 78 was not sustainable. Therefore, the tribunal set aside the penalties imposed under sections 77 and 78 of the Finance Act, 1994, and allowed the appeal to that extent. This decision was made based on the specific circumstances and nature of the appellant's activities, leading to the conclusion that the penalties were not justified in this case.

In conclusion, the appellate tribunal upheld the demand for tax collection not deposited in the government exchequer under the Finance Act, 1994. However, it set aside the penalties imposed under sections 77 and 78 of the Act, considering the appellant's role as a government department and the circumstances surrounding the non-deposit of the service tax component.