2007 (8) TMI 275 - AT - Service Tax

Servicing of motor vehicles equal amount of penalty imposed for delay in payment of service tax since the entire amount was paid before the adjudication of the case and there is no intention to evade payment of tax, maximum penalty equal to tax imposed by the lower authorities is neither appropriate nor reasonable penalty reducible

Summary

Issues:
1. Reduction of penalty imposed on the assessee by the Commissioner (Appeals) equal to the service tax not paid in time.
2. Appeal filed by the revenue to restore the penalty imposed on the respondents by the original authority.

Analysis:
1. The case involved M/s. A.R.A.S.P.V.P.V. Madurai, a service provider of motor vehicles, who failed to pay service tax amounting to Rs. 7,22,724 for services rendered between 1-10-01 to 31-3-03. The Deputy Commissioner demanded the unpaid tax, interest, and imposed penalties under Sections 76 and 77 of the Finance Act, 1994. The Commissioner (Appeals) reduced the penalty to Rs. 75,000, citing a Tribunal decision that penalties equal to the unpaid tax are not appropriate if the amount is paid before adjudication and there is no intent to evade payment.

2. The revenue filed an appeal seeking to reinstate the original penalty, arguing that as per the statute, the penalty under Section 76 should be at least equal to the service tax not paid. The respondents contended that maximum penalty was unwarranted since they promptly paid the tax and interest upon notification of the default. The Senior Departmental Representative (SDR) acknowledged the absence of evidence of an attempt to evade tax by the respondents in the impugned order.

3. The Member (Tribunal) considered the submissions and records, noting that the respondents promptly paid the tax and interest upon notification, with no evidence of evasion. In light of the circumstances and the precedent cited, the imposed penalty of Rs. 75,000 was deemed appropriate. Consequently, the appeal by the revenue was dismissed, upholding the reduced penalty imposed by the Commissioner (Appeals).