2016 (8) TMI 548 - AT - Service Tax

Imposition of penalty - Section 76 of the Finance Act, 1994 non-payment of service tax - no wilful intention to evade tax payment of tax and interest on being pointed out by auditor before SCN - Held that - any person who fails to pay service tax shall be liable to a penalty under the provisions of said section. There are no conditions or ifs and buts in the said Section. Hence, the contention of the appellant that they had not paid the service tax because of a bonafide mistake is not relevant. Section 78 of the Finance Act, 1994 - the freight charges shown in the Freight Ledger do not tally with the figures shown in the ST-3 Returns for 3 years continued suppression of facts Held that - penalty under Section 78 is imposable if service tax is not paid with intent to evade payment of service tax by suppressing or concealing the value of taxable service. The appellant which is a limited company had suppressed the figures of freight charges paid in the ST-3 Returns filed. However, they had shown the correct figures in the ledgers, which was detected by the Central Excise Audit Officers. If, the audit had not detected the same, the service tax would not have been paid and the public exchequer would have been poorer by the said amount. Thus, penalty rightly imposed. Appeal dismissed decided against appellant.

Issues Involved:
1. Imposition of penalty under Section 76 of the Finance Act, 1994.
2. Imposition of penalty under Section 78 of the Finance Act, 1994.
3. Applicability of provisions under Section 73(3) and Section 80 of the Finance Act, 1994.

Issue-wise Detailed Analysis:

1. Imposition of Penalty under Section 76 of the Finance Act, 1994:
The appellants contended that penalties under Section 76 were not applicable as the non-payment of service tax was due to a bona fide mistake without any wilful intention to evade tax. They argued that since they paid the service tax and interest before the issuance of the show cause notice, no penalty should be imposed. However, the tribunal observed that Section 76 did not provide any conditions or exceptions based on the intention behind non-payment. The section clearly stated that any person who fails to pay service tax shall be liable to a penalty. Therefore, the tribunal held that the contention of the appellants regarding a bona fide mistake was irrelevant, and the penalty under Section 76 was rightly imposed.

2. Imposition of Penalty under Section 78 of the Finance Act, 1994:
The appellants argued that there was no intention to evade service tax, and hence, penalties under Section 78 should not be imposed. However, the tribunal found that the appellants had suppressed the figures of freight charges paid in the ST-3 Returns filed, which were later detected by the Central Excise Audit Officers. The tribunal noted that if the audit had not detected the discrepancy, the service tax would not have been paid, leading to a loss for the public exchequer. Therefore, the tribunal concluded that there was deliberate suppression of facts with an intention to evade service tax, justifying the imposition of penalty under Section 78.

3. Applicability of Provisions under Section 73(3) and Section 80 of the Finance Act, 1994:
The appellants relied on the provisions under Section 73(3) and Section 80, which state that no penalty should be imposed if the service tax is paid before the issuance of the show cause notice. However, the tribunal clarified that these provisions are not applicable in cases of deliberate suppression of facts and intention to evade service tax. The tribunal referred to the judgments of the Hon’ble Karnataka High Court in the case of Manipal County and the Tribunal in the case of Arvind Limited, noting that the facts in these cases were different. The tribunal also cited the decisions of the Hon’ble Kerala High Court in the case of Assistant Commissioner of Central Excise vs. Krishna Poduval and the Hon’ble Delhi High Court in the case of Bajaj Travels Ltd. vs. Commissioner of Service Tax, which upheld the imposition of penalties under both Sections 76 and 78 for distinct and separate offences.

Conclusion:
The tribunal dismissed the appeal, upholding the penalties imposed under Sections 76 and 78 of the Finance Act, 1994. The tribunal emphasized that the appellants' arguments were not maintainable, as the penalties were rightly imposed for non-payment and deliberate suppression of service tax. The appeal was dismissed, and the judgment was pronounced in the open court.

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