2009 (10) TMI 27 - AT - Service Tax

Delay in payment of service tax penalty chartered accountancy firm - held that - reasons explained for delay in payment of service tax are reasonable since the work of filing returns and paying tax etc. are often left to junior staff by the assessee and such mistakes can happen - Chartered Accountant is supposed to know the law and in fact advise others penalty imposed u/s 77 for late filing of return upheld penalty imposed u/s 76 set aside.

Summary

Issues:
1. Failure to file service tax returns for specific periods.
2. Delay in payment of service tax.
3. Imposition of penalties under Section 76 and Section 77.
4. Request for waiver of penalties under Section 80 of Finance Act, 1994.

Analysis:
1. The appellant, engaged in providing services as a Practicing Chartered Accountant, was found to have not filed service tax returns for the six months ending in September 2006. Additionally, the appellant failed to pay service tax within the due dates for three quarters: June 2005, September 2005, and December 2005. A show cause notice was issued on 25.7.2007, and the appellant paid interest of Rs. 52. Penalties of Rs. 6,200 under Section 76 and Rs. 2,000 under Section 77 were imposed.

2. The appellant's representative argued that the due date for service tax payment had changed from the 25th to the 5th of the month with effect from 01.4.2005. Due to this change, there was a delay in payment as the employee continued to pay tax before the 25th. However, no explanation was provided for not filing the return for the quarter ending in September 2005. The representative also claimed that the appellant was eligible for exemption as the value of services did not exceed a certain amount, and despite this, the appellant had collected and paid the service tax. The representative requested the waiver of penalties under Section 80 of the Finance Act, 1994.

3. The respondent argued that as a Chartered Accountant, the appellant should have been aware of the legal provisions and advised accordingly, thus there was no reasonable cause for waiving the penalty.

4. The judge, considering the short issue involved, waived the requirement of pre-deposit of penalty and proceeded with the final disposal of the matter.

5. After reviewing the submissions, the judge found the reasons for the delay in payment of service tax to be reasonable due to the delegation of such tasks to junior staff. The appellant was deemed to have shown sufficient reasonable cause for the waiver of penalty under Section 76. However, considering the appellant's profession as a Chartered Accountant, the penalty of Rs. 2,000 imposed under Section 77 for contravention of legal provisions was upheld. The appeal was allowed by setting aside the penalty under Section 76 and upholding the penalty of Rs. 2,000 under Section 77.