2017 (1) TMI 306 - AT - Service Tax

Imposition of penalty u/s 77 and 78 - the appellant had collected the Service Tax from their clients and failed to deposit the same in timely manner with the Revenue - Held that - The appellant had given the Service Tax challan details. From the said challan details, it appears that there is no regular payment of Service Tax by the appellants. The appellants have not placed before us any correlation of the tax liability arise during the month and payment made during the month/quarter. The fact is that the appellant have not denied that they have not paid the Service Tax to the Government exchequer despite collecting the same from the clients - penalty u/s 78 are rightly attracted - appeal rejected - decided against assessee.

Summary

Issues:
Service Tax liability confirmation, interest imposition, penalty under Section 78 of the Finance Act, 1994, failure to deposit Service Tax, failure to file statutory ST-3 returns, delay in payment of Service Tax, financial pressure due to working capital crunch, delay in filing ST-3 returns, delay in payment due to financial constraints, non-deposit of collected Service Tax, penalty imposition, appropriateness of penalty amount, regular payment of Service Tax, correlation of tax liability and payments, rejection of appeal.

Analysis:
The appeal pertains to M/s Malhar Multy Services challenging an order confirming Service Tax liability, interest imposition, and penalty equivalent to duty under Section 78 of the Finance Act, 1994. The appellant provided services under various categories, including 'Manpower recruitment & supply agency service', 'cleaning services', 'Security Agency Services', and Outdoor catering services. The issue arose when the appellant collected Service Tax from clients but failed to deposit it to the Government exchequer and did not file statutory ST-3 returns, leading to the issuance of a notice confirming the demand, interest, and penalties under Sections 78 and 77. Notably, no penalty under Section 76 was imposed. The appellants contested the order before the Tribunal.

The appellant's counsel argued that there was a delay in payment of Service Tax, which attracted interest. Despite facing severe working capital crunch, the appellant claimed they regularly discharged Service Tax and filed ST-3 returns, attributing the delays to staff attrition and financial pressures. They highlighted challenges in obtaining funds due to lack of tangible security. Conversely, the respondent relied on the order, emphasizing the appellant's failure to file ST-3 returns or pay Service Tax for the services provided. The respondent pointed out that the appellant collected Service Tax from clients but did not deny this fact. Citing a Supreme Court decision, the respondent argued that mens rea was not necessary to impose penalties, asserting the appellant's violation of rules by collecting but not paying the tax until detected by Revenue.

Upon reviewing the submissions, it was established that the appellant collected Service Tax but failed to timely deposit it with the Revenue. An enquiry confirmed the appellant's payment of the entire tax liability demanded, which the impugned order did not appropriately acknowledge. Additionally, the appellant's lack of regular payment of Service Tax, as evidenced by challan details, indicated non-compliance despite collecting taxes from clients. Consequently, Section 78 provisions were deemed applicable, leading to the rejection of the appeal.

In conclusion, the Tribunal upheld the order confirming the Service Tax liability, interest, and penalties under Section 78, emphasizing the appellant's failure to deposit collected taxes and the lack of regular payments to the Government exchequer. The decision underscores the importance of timely tax compliance and the consequences of non-depositing collected taxes, resulting in the dismissal of the appeal.