2017 (5) TMI 1201 - AT - Service Tax

Penalty u/s 78 - power of Commissioner to condone delay - condonation of delay in filing appeal - Commissioner could not have condoned the delay in excess of two months - Held that - It can be seen that the Finance Act was amended on 28/05/2012 and only thereafter sub-section (3A) of Section 85 within the operational prior to 28/05/2012. The Commissioner at the material time had power to condone the delay of upto to three months. In view of the above, it is seen that the Commissioner (Appeals) has not exceeded his power and therefore, the miscellaneous application is dismissed. It is a fact that the respondent had collected service tax from the clients and still not paid to Revenue. The reason given by the Commissioner (Appeals) for non-imposition of penalty is that the respondent was in a rural area and not very highly educated. It is a fact that the respondent has collected the service tax from the client and not paid to Revenue. Levy of Penalty confirmed - appeal allowed - decided partly in favor of revenue.

Summary

Issues:
1. Condonation of delay in filing appeal beyond prescribed limit.
2. Imposition of penalty under Section 78 for non-payment of service tax.

Analysis:

Issue 1: Condonation of delay in filing appeal beyond prescribed limit
The appeal and miscellaneous application were filed by the Revenue against the order of the Commissioner (Appeals) confirming the demand of duty against the respondent but dropping the penalty under Section 78. The Revenue argued that the Commissioner had condoned the delay in filing the appeal beyond the prescribed limit. The Commissioner had passed the order-in-original on 30/03/2012, received by the respondent on 06/07/2012, and the appeal was filed on 24/12/2012. The Revenue contended that the delay could not have been condoned beyond two months. The relevant provisions of sub-section 3A of Section 85 of the Finance Bill, 1994 were discussed, which allowed for a further period of three months for filing an appeal. The Tribunal noted that the Commissioner (Appeals) had not exceeded his power in condoning the delay, as the Finance Act was amended on 28/05/2012, and sub-section (3A) of Section 85 was operational before that date. Therefore, the miscellaneous application by the Revenue was dismissed.

Issue 2: Imposition of penalty under Section 78 for non-payment of service tax
The appeal filed by the Revenue was against the non-imposition of penalty and the dropping of penalty under Section 78 by the Commissioner (Appeals). The Revenue contended that the respondent had collected service tax from clients but failed to pay it to the Revenue, constituting a serious offense. The Commissioner (Appeals) had cited the respondent's lack of education and awareness of the law as reasons for dropping the penalty. However, the Tribunal found that the respondent had indeed collected service tax but not remitted it to the Revenue, which was a significant offense justifying the imposition of penalties. Consequently, the order of the Commissioner (Appeals) dropping the penalty was set aside, and the appeal of the Revenue was allowed. The miscellaneous application was also disposed of.

This detailed analysis of the judgment provides insights into the issues of condonation of delay in filing the appeal and the imposition of penalties for non-payment of service tax, as addressed by the Appellate Tribunal CESTAT MUMBAI.