2009 (9) TMI 34 - AT - Service Tax

Waiver of penalty imposed under section 77 and 78 - On the outset it is noticed that the demand has been raised based on audit objection. It is not followed by recording of any statement to bring out the mensrea if any involved. However the appellant is not disputing the serviced tax liability. Only prayer is for setting aside the penalties under section 78 and 77. In this case the service tax and the interest has been paid prior to passing of the order by the adjudicating authority - There is also no evidence relied upon which can show intentions to evade the tax. Penalty reduced under section 78 from Rs.55, 024/- to Rs.13, 756/-

Summary

Issues:
1. Appeal against the order of the Commissioner (Appeals) regarding service tax demand, interest, and penalties under sections 76, 77, and 78.
2. Dispute over the penalties imposed under sections 77 and 78.
3. Discrepancy in figures between income tax return and service tax charges return.
4. Justification of penalties by the original authority and Commissioner (Appeals).
5. Consideration of intention to evade service tax and reduction of penalties under section 78.

Analysis:
1. The appeal was made against the order of the Commissioner (Appeals) upholding the service tax demand, interest, and penalties under sections 76, 77, and 78. The appellant, represented by a Company Secretary, did not dispute the service tax demand but sought a waiver of the penalties under sections 77 and 78. The appellant argued that the difference in figures between income tax returns and service tax charges was due to a clerical error, with no mensrea or evidence of wilful suppression. Reference was made to a Tribunal decision for reducing penalties in similar cases.

2. The Respondent contended that the significant variation in figures between income tax and service tax returns indicated misdeclaration of turnover for service tax purposes, justifying the penalties imposed by the original authority and upheld by the Commissioner (Appeals). Citing a Tribunal decision, the Respondent argued that leniency cannot be granted when there is no reasonable cause for failing to pay service tax on time.

3. Upon careful consideration of both sides' submissions and records, the Member (Technical) noted that the demand was based on an audit objection without any recorded statement to establish mensrea. While the appellant did not dispute the service tax liability and had paid the tax and interest before the order, they claimed a clerical error. After reviewing the evidence, the Member found no intention to evade service tax and reduced the penalty under section 78 from Rs. 55,024 to Rs. 13,756, setting aside the penalty under section 77. There was no request for waiving the penalty under section 76.

4. The appeal was ultimately disposed of by upholding the uncontested service tax demand and interest, as well as the penalty under section 76. The penalty under section 77 was set aside, and the penalty under section 78 was reduced to 25% of the original amount imposed.

This detailed analysis of the judgment highlights the key arguments, considerations, and outcomes related to the issues raised in the appeal before the Appellate Tribunal CESTAT, New Delhi.