2017 (1) TMI 99 - AT - Service Tax

Interest on delayed payment of tax - imposition of penalties u/s 76 and 77 - Dredging Services - Held that - The Ld. Counsel has explained that the appellant was under the belief that they have paid excess service tax and sought the same to be adjusted in the subsequent period. Taking in to consideration these contentions as well as the fact that the appellant is a Government of India under taking, the penalty imposed u/s 76, in my view is unwarranted - I do not find any reason to interfere with the penalty of ₹ 10,000/- imposed u/s 77 as the appellants did not file their returns in due time - appeal disposed off - decided partly in favor of appellant.

Summary

Issues:
1. Applicability of interest on delayed service tax payment.
2. Imposition of penalties under Section 76 and 77 of the Finance Act, 1944.

Analysis:

Issue 1: Applicability of interest on delayed service tax payment
The case involved the appellants not paying applicable interest on delayed service tax payment under Dredging Services category from 01.04.2007 to 31.10.2007. The total service tax payable was &8377; 5,97,85,144, but the appellants paid only &8377; 4,18,46,665 during that period. The appellants later paid the differential service tax of &8377; 1,79,38,479 based on their assessment. The department alleged non-payment of applicable interest amounting to &8377; 9,66,588. The original authority confirmed the interest demand and imposed penalties under Sections 76, 77, and dropped the penalty under Section 78. The appellant challenged the confirmation of interest and penalties under Sections 76 and 77.

Issue 2: Imposition of penalties under Section 76 and 77
During the hearing, the appellant's counsel argued that there was no willful evasion of service tax payment, attributing the delay to information delays from other ports. The appellant believed they had overpaid in the previous period and could adjust it in the relevant period. It was emphasized that being a Government of India undertaking, there was no intention to evade duty. The Tribunal noted that the case involved delayed payment of service tax without any evasion allegation. The penalty was imposed for non-payment of interest. Considering the appellant's contentions and government status, the Tribunal deemed the penalty under Section 76 unwarranted and set it aside. However, the penalty of &8377; 10,000 under Section 77 for not filing returns on time was upheld. The Tribunal modified the impugned order by setting aside the penalty under Section 76 while maintaining the interest demand and penalty under Section 77, partially allowing the appeal.

In conclusion, the Tribunal set aside the penalty under Section 76 but upheld the penalty under Section 77, emphasizing the lack of evasion and the appellant's belief in overpayment for adjusting in subsequent periods.