2008 (3) TMI 121 - AT - Service Tax

Cable Service - appellant did not discharge the service tax liability in time as their association was pursuing the matter with the Government - This explanation has not been accepted by the lower authorities -. In view of the fact that appellant had already discharged the service tax liability along with interest even before the issue of show cause notice, the imposition of penalties is not warranted

Summary

Issues:
- Non-payment of service tax by cable service providers
- Imposition of penalties under Section 76 and Section 77
- Applicability of extended period for show cause notice
- Discharge of service tax liability before show cause notice

Analysis:

1. Non-payment of service tax by cable service providers:
The case involved cable service providers who were proceeded against for non-payment of service tax. The Deputy Commissioner demanded an amount along with penalties under Section 76 and Section 77. The appellants had taken Service Tax registration in September 2002. The Commissioner (Appeals) upheld the order of the lower authority stating that the appellants were legally bound to collect service tax from subscribers and pay it to the Government. The appellants argued that they had already paid service tax for specific periods and that the extended period for the show cause notice was time-barred. The Deputy Commissioner had acknowledged the reason for the failure to pay the correct amount of tax and submission of returns as reasonable.

2. Imposition of penalties under Section 76 and Section 77:
The Deputy Commissioner did not impose any penalty under Section 78 but imposed penalties under Section 76, which the appellants contested. The appellants argued that since the Deputy Commissioner had found their reasons reasonable, no penalty should have been imposed under Section 76. They further contended that under Section 80 of the Finance Act, they should have been given protection instead of facing penalties. The Commissioner (Appeals) did not provide any finding on these pleas, leading to the appellants requesting to set aside the impugned order.

3. Applicability of extended period for show cause notice:
The appellants argued that the show cause notice for a specific period was time-barred as the service tax had already been paid before the notice was issued. They contended that the longer period cannot be invoked as per the facts presented in the Adjudication Order.

4. Discharge of service tax liability before show cause notice:
Upon careful consideration, the Tribunal found that the appellants had indeed discharged the service tax liability along with interest even before the show cause notice was issued. Despite the lower authorities not accepting the explanation provided by the appellants, the Tribunal concluded that the imposition of penalties was not warranted. The Tribunal noted that the lower authority could have utilized its powers under Section 80 of the Finance Act, 1994, to modify or set aside the penalties. Consequently, the penalties imposed were set aside, and the appeal was allowed.