2017 (6) TMI 218 - AT - Service Tax

Penalty u/s 78 of the FA - short payment of tax - Held that - there is no suppression of facts on the part of the appellant which attracts Section 78 of the FA - There was some computation error on account of discrepancies between the profit and loss account and the ST-3 returns but the same was clarified by the Bank and thereafter appellant also admitted calculation mistakes and reversed the same with interest - penalty not justified - appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against rejection of appellant's appeal by Commissioner (Appeals) - Short-payment of service tax - Imposition of penalty under Section 78 of the Finance Act.

Analysis:

1. Short-payment of Service Tax:
The appellant, a registered entity under service tax for banking and financial services, faced allegations of short-payment amounting to ?92,500 for the period 2005-06 to 2009-10. The Department issued a show-cause notice, and after due process, confirmed the demand under Section 73(1) of the Act, along with interest and penalty. The appellant accepted short-payment of ?76,696 and produced challans for the payment of the accepted tax liability along with interest. The Commissioner (Appeals) rejected the appeal, leading to the present appeal.

2. Imposition of Penalty under Section 78:
The appellant contested the imposition of an equal penalty under Section 78 of the Finance Act. The appellant argued that the Department's scrutiny was based on accrual basis, whereas service tax was payable on a receipt basis during the relevant period. The appellant highlighted that the accounting practices followed were in line with prudent norms and accepted principles. It was emphasized that there was no intention to evade duty, and any discrepancies were inadvertent errors without malafide intent. The appellant, being a Public Sector Undertaking and a nationalized bank, adhered to RBI regulations and underwent various audits. The appellant presented reconciliation statements and profit and loss accounts to support their case.

3. Judgment and Relief:
After analyzing the submissions and material presented, the Tribunal found no suppression of facts by the appellant warranting the imposition of equal penalty under Section 78. Considering the nature of the appellant as a Public Sector Undertaking and the absence of any intent to evade tax, the Tribunal held that the penalty was unjustified. Citing relevant legal precedents, the Tribunal concluded that the appellant's actions did not demonstrate any deliberate evasion. Consequently, the Tribunal allowed the appeal, setting aside the impugned order and providing consequential relief as necessary.

In conclusion, the Tribunal's judgment favored the appellant by overturning the penalty imposed under Section 78 of the Finance Act, emphasizing the absence of intentional evasion and the appellant's compliance with regulatory norms and corrective actions taken.