2008 (8) TMI 137 - AT - Service Tax

Delay in payment of tax - Pandal and Shamiana Contractor Service provided to police - after the letter of the Addl. Commissioner of Central Excise informing them to pay the tax the Appellants took one year for payment of tax - imposition of penalty is justified but penalty of equal amount of tax is not justified - Appellant deposited the tax with interest before issue of SCN and delay in payment was caused due to delay in payment of tax by the Police Authorities therefore penalty is reduced

Summary

Issues:
1. Liability of payment of service tax by the Appellants.
2. Imposition of penalty under Section 76 of the Finance Act, 1994.

Analysis:

Issue 1: Liability of payment of service tax by the Appellants
The case involved the Appellants engaged in providing taxable services and entering into an agreement with authorities for supply of services for an event. Initially, there was confusion regarding the payment of service tax, but it was clarified later through correspondence. The Appellants were aware of the tax liability as per the agreement. The Appellants received payment for their services excluding service tax, which was later paid by the authorities. The Appellants deposited the tax after a delay, citing the reason that the authorities had not released the tax amount promptly. The Tribunal found that the liability of payment of tax rested with the Appellants, and the delay in payment was attributed to them. The Tribunal noted that the Appellants took a year to pay the tax after being informed by the authorities. Despite the confusion initially, the Tribunal held that the imposition of penalty was justified due to the delay caused by the Appellants. However, considering the circumstances, the penalty amount was reduced significantly.

Issue 2: Imposition of penalty under Section 76 of the Finance Act, 1994
The Adjudicating Authority had confirmed the demand of tax and imposed a penalty under Section 76 of the Finance Act, 1994. The Commissioner (Appeals) upheld this decision. The Appellant argued that there was no mala fide intention and that the penalty was not sustainable. The Appellant relied on a previous Tribunal decision to support their case. On the other hand, the Revenue reiterated the findings of the Commissioner (Appeals), emphasizing that the Appellant was aware of the tax liability as per the agreement. The Revenue contended that the Appellant should be penalized for failing to pay the tax within the stipulated period, regardless of the funds' release by the authorities. The Tribunal, after hearing both sides and reviewing the records, agreed with the Revenue's submission that the penalty was justified due to the Appellant's delay in payment. However, the Tribunal also considered the Appellant's timely deposit of tax with interest before the show cause notice and the delay caused by the authorities in releasing the tax amount. Consequently, the Tribunal reduced the penalty amount significantly from the original imposition.

In conclusion, the Tribunal upheld the liability of the Appellants to pay the service tax and justified the imposition of a penalty under Section 76 of the Finance Act, 1994. However, considering the overall circumstances, the Tribunal reduced the penalty amount to Rs. 20,000, acknowledging the factors contributing to the delay in payment.