2017 (4) TMI 592 - AT - Service Tax

Levy of penalty - Failure to pay tax - financial difficulty - repeated failure - demand of duty, interest and penalty - Held that - While the appellant is doubtlessly a sick unit, they have also got into the habit of not only making payments belatedly, but also expecting every time, waiver of penalty amounts. In the instant case, they have also not discharged their interest liability - the full waiver of penalty imposed on them would be unjust to Revenue and to the exchequer. However, keeping in mind that financial difficulties of appellant have escalated to a point that they have had applied to BIFR for financial rehabilitation, there is a case for granting partial reduction of the penalty amount. Accordingly, the penalty amount is reduced to ₹ 6,00,000/- - appeal disposed off - decided partly in favor of appellant.

Summary

Issues:
1. Service tax liability for the period June 2009 to September 2011.
2. Demand of service tax, interest liability, and penalty under Section 73 and Section 78 of the Finance Act, 1994.
3. Appeal for waiver of penalty due to financial constraints and sickness of the appellant.
4. Arguments regarding belated discharge of tax liability, intention to evade, and interest liability.
5. Consideration of the plea of the appellant being a sick unit by the lower appellate authority.
6. Previous instances of waiver of penalty, sympathy towards the appellant's financial difficulties, and the need to balance the interest of the exchequer.

Analysis:
The case involved the appellants conducting job work of cutting steel coils and rods for clients without paying service tax liability for the period June 2009 to September 2011, despite collecting service tax from clients. The original authority confirmed the demand of service tax, interest, and imposed a penalty. The Commissioner (Appeals) upheld this decision. The appellants appealed, seeking waiver of the penalty due to financial constraints and the appellant being declared a sick unit. The appellant's representative argued that previous belated payments were due to financial constraints and sought leniency. The Revenue opposed the appeal, highlighting consistent belated tax discharges and non-payment of interest liability.

The Tribunal considered the arguments, acknowledging the appellant's financial difficulties and past waivers of penalties. However, it emphasized the importance of balancing sympathy with the interest of the exchequer. The Tribunal noted that while the appellant was a sick unit, they had a habit of making belated payments and expecting penalty waivers. Despite sympathy towards their situation, the Tribunal found that full waiver of the penalty would be unjust to the Revenue. Consequently, the penalty was reduced to ?6,00,000, subject to payment within three months along with the interest liability. The Tribunal partially allowed the appeal, considering the appellant's financial distress but also upholding the interest of the exchequer.