2007 (12) TMI 196 - AT - Service Tax

Services of coaching centre - They paid tax @ 8% and filed the return accordingly. Later Service tax was enhanced from 8% to 10.2% w.e.f. 10-9-2004 by Finance Act, 2004. The differential amount of tax with interest were deposited by them on 24-11-2005 - appellant paid tax @ 8% and filed the return and therefore the allegation of suppression of facts with intent to evade duty is not sustainable but penalty is imposable for delay in depositing differential amount of tax

Summary

Issues: Imposition of penalty under Sections 76 and 78 of the Finance Act, 1994.

Analysis:
1. The appellant challenged the penalty imposed under Sections 76 and 78 of the Finance Act, 1994, in response to a revision order by the Commissioner of Central Excise. The appellant, a coaching center service provider, initially paid tax at 8%, which was later increased to 10.2% effective from 10-9-2004 by the Finance Act, 2004. The appellant deposited the differential tax with interest on 24-11-2005. The adjudicating authority initially dropped the penalty considering the appellant's bona fide belief in the 8% rate and absence of intent to evade tax.

2. The appellant's advocate argued that there was no suppression of facts with intent to evade tax, citing a decision from the High Court of Karnataka. On the other hand, the Departmental Representative contended that the appellant delayed the payment of differential tax by 14 months, justifying the penalty under Section 76. The department also alleged that the appellant suppressed the value of taxable services, warranting the invocation of Section 78.

3. Upon review, the Member (J) found that the appellant had indeed paid tax at 8% initially and filed returns accordingly. Therefore, the allegation of suppression of facts to evade duty was deemed unsustainable, and Section 78 could not be invoked. However, the Commissioner's finding indicated that the appellant accepted the short payment of tax and rectified it only after departmental pursuit, justifying the penalty under Section 76.

4. The Member (J) concurred with the Commissioner's assessment that the case did not involve a mere interpretation of the law. It was evident that the appellant was liable to pay the differential tax from 10-9-2004, which was settled on 24-11-2005. Consequently, the imposition of penalty under Section 76 was deemed justified. Therefore, the penalty under Section 78 was set aside, while the penalty under Section 76 was upheld, resulting in a modification of the original order.