2017 (1) TMI 165 - AT - Service Tax

Imposition of penalties - mis-match of value - intent to evade tax - Held that - The contention of the appellant is that the short payment of service tax occurred because of the difference in the amounts collected and the amounts reflected in the balance sheet. On coming to know of the fact the appellant made payment of ₹ 1,63,913/- and requested for remand of the matter to verify whether there was actually any difference in the amount reflected in balance sheets and that actually received - It is seen that appellant has not replied to the show cause notice. Even though no reply was filed, it has to be considered that the appellant has attended the personal hearing - Further written submissions was filed on behalf of the appellant in the personal hearing held on 18-10-2007 before the Commissioner (Appeals). In the said written submission, it is stated that the appellant accepted the liability of service tax, and prayed for waiving the penalty by invoking Section 80 of the Finance Act. This being so, as the appellant having accepted the liability and also having not defended the show cause notice, even after getting opportunity, I am of the view that the beneficial provision of Section 80 need not be invoked. I find penalty imposed under Section 78 to be legal and proper. However, the penalty imposed u/s 76 is set aside - appeal allowed - decided partly in favor of appellant.

Summary

Issues:
Imposition of penalties under Section 76 and 78 of the Finance Act simultaneously, mismatch between amounts collected and reflected in balance sheet leading to short payment of service tax, request for waiver of penalties invoking Section 80 of the Finance Act.

Analysis:

1. Imposition of Penalties under Section 76 and 78:
The appellant appealed against penalties imposed by the authorities under Section 76 and 78 of the Finance Act. The Tribunal noted that previous decisions held that imposing penalties under both sections simultaneously is unsustainable. The appellant argued that the short payment of service tax was due to a discrepancy between amounts collected and those reflected in the balance sheet. The appellant requested a remand to verify the difference. Despite not replying to the show cause notice, the appellant attended the personal hearing and submitted written explanations. The Tribunal found that penalties under Section 76 and 78 cannot be imposed concurrently and set aside the penalty under Section 76, deeming the penalty under Section 78 as legal and proper.

2. Mismatch in Amounts Collected and Reflected in Balance Sheet:
The appellant contended that the discrepancy in the service tax payment arose from a mismatch between the amounts collected and those reflected in the balance sheet. The appellant argued that there was no intentional evasion of tax and had paid a significant amount along with interest before the show cause notice was issued. The appellant sought a remand to establish the reasons for the difference in figures between the balance sheet and ST-3 returns. However, despite accepting the liability for service tax and attending hearings, the appellant did not provide a detailed defense against the show cause notice. The Tribunal considered the appellant's submissions but decided not to invoke the beneficial provision of Section 80 of the Finance Act due to the appellant's acceptance of liability and lack of a strong defense.

3. Request for Waiver of Penalties under Section 80:
The appellant requested the waiver of penalties by invoking Section 80 of the Finance Act, arguing that there was no intentional evasion of service tax. However, the Tribunal did not grant this request as the appellant had accepted the liability for service tax and did not adequately defend against the show cause notice. The Tribunal modified the impugned order by setting aside the penalty under Section 76 but upheld the penalty under Section 78, partially allowing the appeal.

In conclusion, the Tribunal partially allowed the appeal by setting aside the penalty under Section 76 while upholding the penalty under Section 78, emphasizing the importance of providing a robust defense when faced with allegations of tax discrepancies.