2009 (4) TMI 49 - AT - Service Tax

Assessee got registered with the Department in June, 2004 but payments made belatedly - It cannot be assumed, that there was any confusion in the mind of the assessee after 06/06/2004, the date on which they got registered with the Department for the purpose of paying service tax in the category of business auxiliary service - Non-recovery of tax from clients is also not a valid excuse for non-payment of tax, nor can the plea of ignorance of law be accepted as a defense - However, it appears, the assessee had no intent to evade payment of service tax, which is clear from the above facts. But this aspect is not relevant to Sections 76 and 77 so, assessee cannot escape penal liability under these provisions

Summary

Issues:
1. Imposition of penalty under Sections 76, 77, and 78 by the Commissioner as a revisional authority.
2. Validity of the penalties imposed under Sections 76 and 77.
3. Applicability of Section 80 of the Finance Act, 1994 to avoid penalties under Sections 76 and 77.

Analysis:

Issue 1: Imposition of penalty under Sections 76, 77, and 78 by the Commissioner as a revisional authority:
The Assistant Commissioner confirmed a demand of service tax and imposed a penalty under Section 78 on the assessee. The Commissioner, as a revisional authority, enhanced the penalty under Section 78 and imposed penalties under Sections 76 and 77. The Tribunal found that the Commissioner exceeded jurisdiction by enhancing the Section 78 penalty while the appeal on the same issue was pending before the Commissioner (Appeals). Consequently, the penalty of Rs. 1.5 lakhs imposed under Section 78 was vacated.

Issue 2: Validity of the penalties imposed under Sections 76 and 77:
The Tribunal considered the penalties imposed under Sections 76 and 77. The assessee argued that penalties should not apply as they had paid service tax with interest before the show-cause notice. However, the Tribunal found no legal support for this argument. The assessee also claimed the benefit of an amnesty scheme, but failed to prove compliance with the scheme's requirements. The Tribunal upheld the penalties under Sections 76 and 77, stating that ignorance of law or confusion does not justify avoiding penalties.

Issue 3: Applicability of Section 80 to avoid penalties under Sections 76 and 77:
The assessee invoked Section 80, claiming that confusion regarding the new levy led to delayed payment of service tax. The Tribunal noted that the assessee's registration with the Department in 2004 should have clarified their tax obligations. Non-recovery of tax from clients and ignorance of law were deemed insufficient reasons to avoid penalties under Sections 76 and 77. While the assessee had no intent to evade payment, this did not absolve them from penal liability under the mentioned sections.

In conclusion, the Tribunal allowed the appeal only in part, upholding the penalties under Sections 76 and 77 while vacating the enhanced penalty under Section 78.