2017 (8) TMI 436 - AT - Service Tax

Penalties u/s 77 and 78 - appellant have collected the service tax from their client and not deposited to the Government exchequer - Held that - The reason given for non-payment of service tax in time is that the appellant was facing the financial crisis is not satisfactory, for the reason that if the appellant had bona fide intention, they would have declared the service tax liability in their ST-3 Return, but they failed to do so. Had the department not initiated the inquiry of non-payment of service tax the same could have left undetected which may cause the revenue loss to the Government - Section 80 not invoked. Moreover, since there is a suppression of fact, as regard non-payment of service tax the provisions of Section 73 (3) is also not applicable to the appellant case. Appeal dismissed - decided against appellant.

Summary

Issues:
1. Non-payment of service tax and penalty imposition under Section 77 & 78 of the Finance Act, 1994.
2. Applicability of waiver of penalty invoking Section 73 (3) and financial crunch as a defense.

Analysis:
1. The appellant provided Works Contract Services and Consulting Engineering Services during July 2008 to September 2009, collecting service tax from clients but not remitting it to the Government. The adjudicating authority issued a show cause notice demanding service tax, interest, and penalty under Section 77 & 78. The appellant appealed for waiver of penalty, citing financial difficulties and prior payment of a portion of the demand. The Commissioner (Appeals) rejected the appeal, leading to the current appeal.

2. The appellant's counsel argued that the non-payment was due to financial constraints, with a bona fide intention to pay evident from partial payments made before detection. The appellant relied on specific judgments to support their case. On the contrary, the Revenue contended that the deliberate non-declaration of service tax liability and non-remittance indicated an intentional evasion. The Revenue emphasized that the cited judgments by the appellant were not directly relevant to the penal provisions under Section 77 & 78 of the Finance Act, 1994.

3. The Tribunal analyzed the submissions and found the primary issue to be the penalties under Section 77 & 78, as the service tax liability was not contested. Despite the financial hardship claim, the appellant's failure to declare the service tax liability in the ST-3 Return raised doubts about the bona fides of their intentions. The Tribunal distinguished between the provisions of Section 11AC and Section 77 & 78, determining that the judgments cited by the appellant were not directly applicable. Due to the suppression of facts regarding non-payment of service tax, the Tribunal upheld the impugned order, dismissing the appeal and emphasizing the inapplicability of Section 73 (3) to the appellant's case.

This detailed analysis of the judgment highlights the key issues of non-payment of service tax, penalty imposition, waiver of penalty, and the Tribunal's decision based on the arguments presented by both sides.