2008 (4) TMI 202 - AT - Service Tax

Cargo handling services delay in payment of tax - appellants have contended that their staff is located in Jalgaon and they were not aware of the provisions of the Service Tax, as it was newly introduced - There is reasonable cause for the delayed payment of the Service Tax & accordingly provisions of Section 80 ibid are rightly invokable for non levy of penalty under Section 76 - penalty is set aside, as the Service Tax liability was discharged before the issue of SCN

Summary

Issues:
Imposition of penalty under Section 76 of the Finance Act, 1994 based on delayed payment of Service Tax.

Analysis:
The judgment revolves around the imposition of a penalty under Section 76 of the Finance Act, 1994 on the appellants for delayed payment of Service Tax. Initially, the Assistant Commissioner refrained from imposing any penalty as the appellants voluntarily paid outstanding dues along with interest before the Show Cause Notice was issued. However, the Commissioner, upon review, imposed a penalty of Rs. 56,221 on the appellants. The Commissioner justified the penalty by stating that the discretion under Section 76 is not absolute and must be exercised within prescribed limits based on the facts of each case. Since no reasonable cause for the delayed payment was provided by the appellants, the penalty was imposed.

The appellants, a Corporate body under the Maharashtra State Government, contended that their Corporate Office in Mumbai handled all administrative and taxation matters. They were advised by their Corporate Office to register for Service Tax and paid a significant portion of the Service Tax along with interest before the Show Cause Notice. The appellants, engaged in providing cargo handling services to fertilizer companies, argued that their staff in Jalgaon were unaware of Service Tax provisions due to its recent introduction. They claimed that had they known about the liability earlier, they could have collected the tax from customers to avoid out-of-pocket payment. The Tribunal found mitigating circumstances in the case, acknowledging a reasonable cause for the delayed payment and invoking Section 80 for non-levy of penalty under Section 76. The appellants had fulfilled their Service Tax liability by paying the entire due amount along with interest.

The Tribunal supported its decision by citing similar cases where penalties under Section 76 were set aside when the Service Tax liability was discharged before the issuance of the Show Cause Notice. By considering the facts and circumstances, the Tribunal concluded that the imposition of the penalty under Section 76 was not justified in this case. Consequently, the Tribunal set aside the penalty and allowed the appeal in favor of the appellants.