2017 (5) TMI 628 - AT - Service Tax

Penalty u/s 78 of FA - erection, commissioning and installation service - belated payment of tax - suppression of facts or not? - Held that - there is no intention to evade the service tax liability and delay in discharge could be due to non-receipt of payment from respondent s customers if could be a justifiable and reasonable cause for belated discharged of tax liability be the respondent. Respondent have discharged the service tax liability before the issuance of the SCN is eligible to get the benefits of Section 73(3) of the FA, 1994 and the Revenue authorities should not have issued any SCN for penalty - penalty set aside by invoking section 80 - appeal dismissed - decided against Revenue.

Summary

Issues involved:
1. Setting aside of penalty under Section 78 of the Finance Act, 1994 by the first appellate authority.

Analysis:

1. The appeal was filed by the Revenue against the Order-in-appeal No.290-2012 dated 28/12/2012. The main issue was whether the first appellate authority was correct in setting aside the penalty imposed by the adjudicating authority under Section 78 of the Finance Act, 1994. The respondents were providing services under the category of erection, commissioning, and installation services. They had short-paid the service tax for the period October 2006 to March 2011, which was noticed during an audit. The adjudicating authority confirmed the demands raised but acknowledged the delay in payment of tax liability due to the non-payment by the respondents' clients. The first appellate authority set aside the penalties imposed under Section 78, citing that the respondents had not suppressed their activity and had rectified the tax liability belatedly.

2. The Revenue argued that the respondents had not paid the service tax from April 2006 and had not filed ST3 returns for the entire period in question. The audit party discovered this during a visit to the respondents' business premises. The Revenue contended that the extended period was correctly invoked due to non-filing of returns and delayed payment, indicating suppression. The Revenue sought to set aside the impugned order and uphold the penalty imposed by the adjudicating authority, emphasizing that there was a short payment of &8377;4,40,685/- at the time of the show-cause notice, which was rectified before adjudication.

3. The Tribunal considered whether the respondents should be penalized under Section 78 of the Finance Act, 1994. Both lower authorities confirmed that the respondents had not received payments from their customer, resulting in a delay in service tax payment. However, the respondents rectified the tax liability before the show-cause notice was issued. The Tribunal upheld the tax liability and directed the respondents to discharge the interest liability within 30 days. Regarding the Revenue's appeal on setting aside the penalty, the Tribunal noted that there was no intention to evade tax liability and the delay could be attributed to non-receipt of payments from customers, a justifiable cause for late payment. Citing legal precedents, the Tribunal held that the penalty set aside was correct and lawful, as there was an honest belief in the circumstances justifying the delay in tax discharge.

4. Consequently, the Tribunal rejected the Revenue's appeal and disposed of the Cross-Objection filed by the respondent, affirming the decision to set aside the penalty under Section 78 of the Finance Act, 1994.