2005 (11) TMI 1 - AT - Service Tax

Penalty - Delay in payment of service tax and delay in filing return - Section 76 section 77 and section 80

Summary

Issues:
1. Delay in payment of service tax and filing of service tax returns.
2. Imposition of interest and penalties on the assessee.
3. Eligibility for benefit under Section 80 of the Finance Act, 1994.
4. Correct quantification of interest by the lower authorities.

Analysis:
1. The appellants provided "Security Agency Service" but defaulted in paying service tax for the period Oct. '01 to Mar. '03, with delays ranging from 75 to 556 days. Additionally, there was a delay in filing service tax returns for three months. The Department issued a show cause notice to recover interest and impose penalties based on these defaults.

2. The original authority calculated interest at 24% per annum up to 15-8-2002 and 15% per annum thereafter, totaling Rs. 22,009. Penalties equal to tax amount under Section 76 and a separate penalty of Rs. 3,000 under Section 77 were imposed. The first appellate authority upheld this decision, leading to the appeal.

3. The appellants argued for exoneration from penalties, citing payment of tax before the show cause notice and financial crisis causing the delay. They claimed eligibility for Section 80 benefits and disputed the interest calculation. The consultant referenced a Tribunal decision supporting a bona fide doubt as a reasonable cause for delayed tax payment.

4. The Tribunal rejected financial crisis as a reasonable cause under Section 80, stating it would render penal provisions ineffective. The legislative intent did not include financial hardships as a valid reason. The Tribunal differentiated penalties under the Central Excise Act from those under the Finance Act, upholding the penalties imposed by the original authority.

5. Regarding interest calculation errors for Aug. '02 to Mar. '03, the Tribunal remanded the matter for the assessee to submit their worksheet for re-quantification by the original authority. The appeal was dismissed except for the quantification of interest, which was remanded for correction.

6. The Tribunal upheld the impugned order, except for the interest quantification, which was remanded for review. The appeal was dismissed accordingly, with the matter disposed of after the corrections are made.

This detailed analysis covers the issues of delay in tax payment, imposition of interest and penalties, eligibility for Section 80 benefits, and the correct quantification of interest as addressed in the judgment by the Appellate Tribunal CESTAT - Chennai.