2016 (8) TMI 149 - AT - Service Tax

Levy of penalty u/s 76 - waiver u/s 80 - reasonable cause - assessee had paid the entire demand along with interest before the adjudication process - Held that - assessee s business was closed down and they were not in a position to pay the service tax. It is my view that the financial difficulty is not a valid reason for waiving penalty when a statutory payment had not been made - The parameters of section 80 of the Act would not apply as no reasonable cause has been shown. - penalty not waived - Decided against the assessee.

Summary

Issues:
1. Demand of service tax and penalty under Section 76.
2. Applicability of Section 80 of the Finance Act for delay in payment.
3. Imposition of penalty under Section 76 for contravention.
4. Financial hardship as a reasonable cause for delay.
5. Comparison with relevant case laws.

Analysis:

1. The case involved a demand for service tax and penalty under Section 76 due to non-payment of service tax for a specific period. The appellant, a shipping company, had paid the demand and interest before adjudication. The Asst. Commissioner confirmed the demand and imposed a penalty under Section 76. The Commissioner (Appeals) upheld the decision, leading to the present appeal challenging the penalty imposition.

2. The appellant argued that they were entitled to benefit under Section 80 of the Finance Act due to a reasonable cause for the delay in payment, which, according to them, should override Section 76. They cited case laws supporting their claim that Section 80 supersedes Section 76 when a reasonable cause is demonstrated. The appellant contended that financial hardship forced them to close down the business, causing the delay in payment.

3. The Revenue representative reiterated the findings of the adjudicating authority, defending the penalty imposition under Section 76. They argued that no reasonable cause was shown for the failure to pay the service tax, justifying the penalty. The discrepancy leading to the penalty imposition was discovered during an audit verification, highlighting the correctness of the penalty.

4. The judge analyzed the arguments presented by both sides. Despite the appellant's claim of financial hardship and lack of intention to evade tax, the judge found that the financial difficulty was not a valid reason to waive the penalty when the statutory payment was not made on time. The judge differentiated the case from the precedent cited by the appellant, emphasizing that no reasonable cause was demonstrated for the delay. Referring to another case, the judge highlighted that when service tax and interest were paid with no intention to evade tax, penalty under Section 76 was not imposed. However, in this case, the reason given for the delay was financial difficulty, which was deemed insufficient to waive the penalty under Section 76. Consequently, the appeal was dismissed, upholding the penalty imposition.

This detailed analysis of the judgment highlights the key issues, arguments presented by both parties, relevant legal provisions, and the judge's reasoning leading to the dismissal of the appeal against the penalty under Section 76.