2016 (6) TMI 1419 - AT - Service Tax

Non-payment of service tax within stipulated time - levy of interest and penalty u/s 76 of FA - period November' 2005 to March' 2006 - HELD THAT - Service tax liability has not been discharged by the appellant within the stipulated time prescribed in Rule 6 of the Service Tax Rules, 1994. Thus, interest liability is automatic and as such, confirmation of such liability by the authorities below is in conformity with the statutory provisions. Penalty u/s 76 - HELD THAT - Imposition of equal amount of penalty under Section 76 of the Finance Act, 1994 is not proper and justified inasmuch as the statute mandates for imposition of penalty in case of non-payment of service tax within stipulated time, which is to the tune of ₹ 100/- per every day for failure to pay the dues or @ 1% of the tax per month, whichever is higher, subject to the condition that amount of penalty payable in terms of this Section shall not exceed 50% of the tax payment - Since there is no specific mandate under Section 76 ibid that equal amount of penalty can be imposed, the impugned order imposing penalty of equal amount of tax is not sustainable under law. The impugned order is confirmed to the extent of demand of service tax of ₹ 1,41,653/- along with interest - For quantifying the penalty under Section 76 ibid, the matter is remanded back to the original authority for proper computation of the quantum of penalty - Appeal allowed by way of remand.

Summary

Issues: Service tax liability non-payment, interest and penalty imposition, proper computation of penalty

In the judgment delivered by the Appellate Tribunal CESTAT NEW DELHI, the appeal was directed against an order upholding the service tax demand, interest, and penalty confirmed by the Commissioner (Appeals). The appellant failed to pay service tax dues for a specific period, leading to the confirmed demand. The appellant argued that due to inadvertence, it did not reverse its Cenvat account within the stipulated time for discharging the tax liability, asserting that the available Cenvat credit balance should suffice. The Revenue, on the other hand, supported the findings of the impugned order.

Upon examination, it was found that the service tax liability was not discharged within the prescribed time, resulting in automatic interest liability as per Rule 6 of the Service Tax Rules, 1994. The confirmation of interest liability was deemed in accordance with statutory provisions. However, the imposition of an equal amount of penalty under Section 76 of the Finance Act, 1994 was deemed improper. The statute mandates penalties for non-payment of service tax within the stipulated time, with specific criteria for penalty calculation. As there was no specific provision allowing for an equal amount of penalty, the order imposing such a penalty was considered unsustainable. The case was remanded back to the original authority for the proper computation of the penalty amount under the un-amended provisions of Section 76.

Consequently, the impugned order was confirmed regarding the service tax demand and interest, but the computation of the penalty under Section 76 was deemed necessary to be revisited by the original authority for accurate quantification. The appeal was disposed of accordingly, with the matter referred back for the precise determination of the penalty amount.