2016 (8) TMI 43 - AT - Service Tax

Waiver of penalty u/s 80 - reasonable cause - bonafide mistake - it was submitted that appellant had misinterpreted the provisions and hence erred in depositing the service tax in time - Held that - The ld. Commissioner (Appeals) denied the relief from penalty in terms of Section 80, as they were not able to substantiate failures to pay the service tax and of non-filing of ST-3 return. I find that both the authorities below dealt the issue in detail and were not satisfied with the reason adduced by the appellant for their failure to pay the service tax and for non-filing of return. - However, the appeal is remanded back to the adjudicating authority to decide the quantum of penalty on ₹ 1,02,367/- under Section 76. As regards imposition of penalty under Section 77 of the Finance Act, 1994, it is upheld since the appellants have failed to submit the ST-3 returns for the period under dispute.

Summary

Issues:
Alleged non-payment of service tax on rendered services and failure to file ST-3 returns; Confirmation of demand by Additional Commissioner; Imposition of penalties under Sections 76 and 77 of the Finance Act, 1994; Dismissal of appeal by Commissioner (Appeals) for lack of reasonable cause; Appeal regarding penalty aspect; Appropriation of service tax paid; Quantum of penalty under Section 76; Remand of the matter to adjudicating authority.

Analysis:

1. The appellant, a service provider under "Cargo Handling" and "Goods Transport Agency" categories, was alleged to have not paid service tax for services rendered from 01.12.2005 to 30.10.2006 and failed to file ST-3 returns for the same period. A show cause notice was issued proposing a demand of service tax, interest, and penalties under Sections 76 and 77 of the Finance Act, 1994. The Additional Commissioner confirmed a demand, appropriated amounts paid, and imposed penalties. The Commissioner (Appeals) dismissed the appeal due to the appellant's failure to show a reasonable cause for non-payment of service tax, leading to the present appeal.

2. The appellant's counsel argued that the misinterpretation of provisions led to the late deposit of service tax, and they sought to set aside the penalties as a substantial amount was paid before the adjudication. On the other hand, the department contended that the appellant contravened Section 68 of the Finance Act, 1994, by not paying service tax for the period in question and failed to provide a reasonable cause for non-payment, citing a relevant High Court judgment.

3. The main issue in the appeal was the penalty aspect. The reconciliation statement showed timely remittance of service tax, with most payments made before the adjudication order. The adjudicating authority had already appropriated these payments. Both lower authorities found the appellant's reasons unsatisfactory for non-payment and non-filing of returns. The Commissioner (Appeals) upheld the penalty, relying on case law, and the High Court precedent cited supported remanding the matter to determine the penalty amount.

4. The Tribunal observed that the penalty under Section 77 was justified due to the appellant's failure to submit ST-3 returns. However, the matter was remanded to the adjudicating authority to decide the penalty amount specifically related to the payment made on 29.08.2007. The appeal was disposed of with the penalty under Section 77 upheld, and the quantum of penalty under Section 76 to be determined by the adjudicating authority.

5. In conclusion, the penalty under Section 77 was maintained, and the case was remanded for the adjudicating authority to decide the penalty amount concerning a specific payment. The judgment was pronounced on 27.06.2016.