2016 (5) TMI 943 - AT - Service Tax

Recovery of interest - Section 73B of the Finance Act, 1994 - Collected Service tax from the transporters when no service tax was payble and not deposited to the Government - later amount was deposited with the government - Held that - a close reading of the section 73B indicates that the situation as covered under sub-Section (1) of Section 73A and determination of liability under sub-Section (4) of the said section were only covered by the interest provision. Apart from the fact that no proceeding required to have been initiated against the appellant for recovery of amount not paid to the Government, the proceedings in this case apparently covered the amount in terms of sub-Section (2) of Section 73A not sub-Section (1) of the said section. Even comparing with the similar provisions in Central Excise Act, 1994 it is apparent from the wordings of Section 73B that amount covered under Sub-Section (2) of Section 73A is not covered by Section 73B. Even otherwise the fact remains that proceedings under sub-Section (3) and determination there upon under sub-Section (4) is not warranted in the present case as the amount has already been remitted to the Government. Therefore, the impugned order in so far as it relates to interest demand is not sustainable. Imposition of penalty - section 77(2) of the Finance Act, 1994 - Held that - the appellant have not remitted the amount collected representing service tax forthwith to the credit of Central Government. The payment was made only after follow up by the Department and as such, the penalty in such situation is justifiable. Accordingly, the payment of amount representing service tax and the penalty are upheld. - Appeal disposed of

Summary

Issues:
1. Failure to deposit collected service tax to the Government.
2. Demand confirmation by the Original Authority under Section 73A (2) of the Finance Act, 1994.
3. Imposition of interest and penalty by the Original Authority.
4. Appeal to Commissioner (Appeals) reducing the penalty.
5. Appeal to Appellate Tribunal CESTAT NEW DELHI challenging the penalty.

Analysis:
1. The issue in this case revolves around the failure of the appellant to deposit the service tax collected from transporters to the Government. The Original Authority confirmed a demand of &8377; 9,50,246/- collected during 2010-2011 under Section 73A (2) of the Finance Act, 1994. The appellant had already paid the amount, which was appropriated, but interest and penalty were imposed.

2. The appellant argued that Section 73B does not cover their case as it pertains to amounts collected in excess of tax assessed or determined under Section 73A (4). They contended that since the tax collected was remitted to the Government after being pointed out, no further proceedings were necessary under sub-Sections (3) and (4) of Section 73A.

3. The Authorized Representative argued that interest liability arises under Section 73B once an order is issued under Section 73A (4) for determination of liability. The failure to deposit the service tax collected, which was not due, attracts interest and penalty as per the provisions of the Finance Act, 1994.

4. The Tribunal examined the case and found that the appellant had collected service tax from transporters when no tax was payable due to an exemption. The irregularity was noticed by the Department, and the appellant paid the amount to the Government after 16 months. The Tribunal noted that proceedings under sub-Section (3) of Section 73A were not required as the appellant's case fell under sub-Section (2) of Section 73A.

5. Ultimately, the Tribunal held that the demand for interest was not sustainable as the appellant had remitted the amount to the Government. However, the penalty of &8377; 5,000 under Section 77 (2) was upheld since the appellant had not deposited the collected amount promptly. The appeal was disposed of with the payment of the service tax amount and penalty upheld.

This judgment highlights the importance of timely depositing collected taxes to the Government and the consequences of failing to do so, including interest and penalties as per the relevant provisions of the Finance Act, 1994.