2008 (7) TMI 226 - AT - Service Tax

Penalty - Manpower Recruitment Agency - Failure to submit ST-3 returns and also to pay the service tax amount - Commissioner in the impugned order have not given a detailed reasoning for setting aside the penalty impugned order is not a speaking order since it was not a case of assessee to set aide the penalty, penalty was only required to be quantified - impugned order is set aside and matter remanded to Commissioner (Appeals) for de novo consideration

Summary

Issues:
Penalty imposition under different sections for failure to submit ST-3 returns and pay service tax; Justifiability of penalty imposition; Mental pressure as a ground for penalty waiver; Lack of detailed reasoning in the impugned order; Need for quantification of penalty amount.

Analysis:
The case involved an appeal arising from the setting aside of penalties imposed on an individual, who operated as a 'Manpower Recruitment Agency,' for failure to submit ST-3 returns and pay the service tax amount due on their taxable turnover. The Revenue had imposed penalties under various sections, including sections 76, 77, and 78. The Commissioner (Appeals) found the penalty unjustifiable due to the individual's claim of being under severe mental pressure while taking care of a sick parent, leading to lapses in tax compliance. The individual had paid the tax along with interest after a show-cause notice was issued, explaining the circumstances that caused the delay. However, the Commissioner's order lacked sufficient reasoning for setting aside the penalties, merely attributing it to the individual's lack of intention to evade tax due to mental pressure.

The Revenue argued that the individual was not entitled to retain the service tax collected but paid it only after several years upon being notified, justifying the imposition of penalties under different sections. The Chartered Accountant representing the individual reiterated the mental pressure defense before the Tribunal. The Tribunal noted that the impugned order was not a speaking order, as it lacked detailed reasoning for setting aside the penalties under all sections, emphasizing that the mere absence of an intention to evade tax due to mental pressure was not sufficient grounds for penalty waiver. The Tribunal held that although the penalty should not have been waived, the quantification of the penalty amount was necessary.

The Chartered Accountant requested an opportunity to present the quantum of penalties required under different sections, which was opposed by the Revenue, arguing that the penalties imposed were justified and did not warrant a rehearing. The Tribunal concluded that the impugned order was not a speaking order and directed the Commissioner (Appeals) to pass a detailed order on the penalty aspect after hearing the appellant/assessee, remanding the matter for de novo consideration within four months from the date of the order receipt. This decision highlighted the importance of providing detailed reasoning for penalty imposition and the need for quantification in such cases to ensure procedural fairness.