2009 (9) TMI 50 - AT - Service Tax

Construction of residential complex non payment of service tax application of extended period of limitation levy of penalty held that penalty is mandatory and can not be waived or set aside.

Summary

Issues:
Demand of service tax on construction of residential flats; imposition of penalty for non-payment of service tax; applicability of penalty provisions under Sections 76, 77, and 78 of the Finance Act, 1994.

Analysis:
The case involved a demand of service tax against the assessees engaged in constructing residential flats under the category of 'Construction of Residential Complex Service' as per Section 65(30a) of the Finance Act, 1994. The Assistant Commissioner did not impose any penalty initially as the assessees had provided details of the amount collected and paid a significant portion of the service tax before the show-cause notice was issued. However, the Commissioner revised the order, holding the assessees liable for penalty for failure to pay service tax on the taxable services received. The penalties imposed included Rs.200/- per day under Section 76 for the period from 16.06.2005 to 17.04.2006, 2% per month under Section 76 from 18.04.2006 until the tax payment date, a penalty of Rs.1,000/- under Section 77, and a penalty of Rs.3,30,451/- under Section 78. The appeal was filed challenging the imposition of penalties.

The key issue before the Tribunal was whether penalty could be imposed for non-payment of service tax in cases where suppression of facts was established. The Tribunal, citing the apex court decision in Union of India Vs Dharmendra Textile Processors, held that once suppression is proven, penalty is automatically attracted. As the finding of suppression against the assessee remained unchallenged, the Tribunal agreed with the Commissioner's decision to impose penalties under Sections 76, 77, and 78 of the Finance Act, 1994. Consequently, the Tribunal upheld the impugned order and rejected the appeal filed by the assessee.

In conclusion, the Tribunal affirmed the imposition of penalties on the assessees for non-payment of service tax on the construction of residential flats, emphasizing that once suppression of facts is established, penalties become applicable as per the relevant provisions of the Finance Act, 1994. The decision underscores the importance of compliance with tax obligations and the consequences of failing to meet such obligations, even in cases where partial payments have been made prior to the issuance of show-cause notices.