2008 (11) TMI 127 - AT - Service Tax

Tax collected but not deposited with Government for four years plea of financial losses, not acceptable - respondents have not brought out any genuine reasons for not depositing the tax with the Government - no case for reducing the penalty has been made out - revenue contention that the penalty u/s 76 which cannot be less than Rs. 200/- per every day is a mandatory penalty, is acceptable Commissioner is not justified in reducing the penalty from minimum imposable revenue s appeal allowed

Summary

Issues:
- Demand of service tax not paid to the Government during a specific period.
- Imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994.
- Reduction of penalties by the Commissioner (Appeals).
- Contention regarding the mandatory nature of minimum penalties under Sections 76 and 78.

Analysis:
1. The case involved an appeal filed by the revenue against Skypak Services Specialities for not paying service tax collected from clients to the Government during April 2001 to March 2005. The Assistant Commissioner confirmed the demand of service tax, interest, and imposed penalties under Sections 76, 77, and 78 of the Finance Act, 1994. On appeal, the Commissioner (Appeals) upheld the demand but reduced the penalties.

2. The revenue contended that penalties under Sections 76 and 78 are mandatory and cannot be reduced below the prescribed amounts. The penalties are calculated based on the amount of service tax evaded and have specific minimum limits. Referring to relevant legal provisions, the revenue argued that the penalties should not have been reduced by the Commissioner (Appeals).

3. The Departmental Representative highlighted a Kerala High Court decision emphasizing the distinct nature of penalties under Sections 76 and 78. It was argued that penalties for different offenses arising from the same transaction should not be reduced. The revenue stressed that the respondents, as established courier service providers, were aware of their tax liability but failed to pay for four years without valid reasons.

4. The respondents justified the reduced penalty by stating that they paid the service tax promptly upon detection, citing financial losses as the reason for the delay. They argued that the penalty reduction by the Commissioner (Appeals) was appropriate since the penalty had been paid.

5. The Member (Tribunal) noted that Section 76 mandates a minimum penalty per day, up to the amount of service tax evaded. Finding no valid reasons for the non-payment over four years, the Member rejected the reduction of penalties. The Commissioner (Appeals) did not address the penalty under Section 78, which was left unaltered. Consequently, the Member set aside the Commissioner (Appeals) order and reinstated the original penalty.

6. Ultimately, the Tribunal pronounced the restoration of the original order-in-original and overturned the decision of the Commissioner (Appeals) regarding the penalty reduction, emphasizing the mandatory nature of minimum penalties under Section 76 of the Finance Act, 1994.

This detailed analysis outlines the issues, arguments presented by both parties, relevant legal provisions, and the final decision of the Appellate Tribunal CESTAT, Mumbai in this case.