2017 (8) TMI 795 - AT - Service Tax

Penalty u/s 78 - delayed payment of tax due to the financial hardships caused due to loss of the business - Held that - the appellant is making payment of service tax intermittently and it is also pleaded that they were undergoing much financial difficulties due to loss of business. That there was much restriction for putting up hoardings and there were litigations pending even before the Hon ble Supreme Court on the said issue and that this caused much financial constraints by which they could not deposit the service tax - there is no evidence to establish that there was any suppression of facts and therefore the penalties imposed under sections 76 and 78 are unwarranted and requires to be set aside - penalty set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Imposition of penalties under sections 76 and 78 for delayed payment of service tax.
2. Challenge on the penalties imposed due to financial hardships causing delay in tax payment.
3. Request for waiver of penalty invoking section 80 of the Finance Act, 1994.
4. Discrepancies in the imposition of penalties by the authorities.
5. Contesting the liability to pay service tax but challenging penalties.

Analysis:
1. The appellants, engaged in advertising agency business, faced financial hardships due to restrictions on hoardings, leading to delayed service tax payment. The Tribunal noted penalties imposed for delayed payments and confirmed demands and interest. Two periods were highlighted: 4/2005 to 9/2006 and 4/2008 to 9/2008, along with interest demands for other periods. The appellants appealed the penalties before the Tribunal.

2. During the hearing, the appellant's counsel admitted the liability for service tax but contested the penalties, citing financial difficulties causing delayed payments. The counsel argued that penalties under section 78 were unjustified due to the absence of required elements. The counsel also invoked section 80 of the Finance Act, 1994, seeking a penalty waiver based on the financial constraints faced by the appellants.

3. The appellant's counsel pointed out discrepancies in penalty imposition by the authorities. They highlighted instances where penalties under section 78 were imposed without a proposal, indicating procedural errors. The counsel emphasized that penalties were being paid with delays even without departmental intervention, attributing the delays to financial challenges rather than intentional evasion.

4. The Tribunal considered the arguments from both sides. The appellant's financial difficulties, arising from business losses and legal restrictions on hoardings, were deemed as valid reasons for delayed tax payments. Not finding any evidence of fraud or suppression, the Tribunal concluded that penalties under sections 76 and 78 were unwarranted. Consequently, the penalties were set aside while confirming the demands and interest payments.

5. In the final decision, the Tribunal partially allowed the appeal by overturning the penalties imposed under sections 76 and 78. The confirmation of demands and interest payments remained unchanged. The Tribunal's ruling emphasized the importance of considering genuine financial hardships when assessing penalties for delayed tax payments.