2009 (10) TMI 32 - AT - Service Tax

Belated payment of service tax levy of penalty held that - the problem appears to have been because of SAP software used by the appellants. Even though it can be said that appellant should have taken care while implementing the software but fact remains that such problems do happen when new software is introduced - Another factor that goes in favour of the appellants is that they had paid service tax in respect of imported Business Auxiliary Services which the Hon ble Mumbai High Court had clarified that it was not liable prior to 18.4.2006 Penalty waived under section 80

Summary

Issues:
1. Delayed payment of service tax by the appellant.
2. Imposition of penalty for delayed payment.
3. Applicability of Section 73 of the Finance Act, 1994.
4. Interpretation of Board Circular No. 341/18/2004-TRU.
5. Liability of service tax on imported Business Auxiliary Services.

Analysis:
1. The audit party of the Central Excise department found that the appellant made delayed payments of service tax from Jan 2005 to March 2007, ranging from 20 days to 166 days. After pointing out the delays, the appellant paid interest but was issued a show cause notice proposing a penalty of Rs. 200 per day for delayed payment, totaling Rs. 6,50,268. The penalty was confirmed after adjudication and appellate proceedings, leading to the appeal.

2. The appellant argued that the delayed payments were unintentional due to the implementation of SAP software during the relevant period. They also highlighted instances of excess payments and cited Section 73(3) of the Finance Act, 1994, along with relevant tribunal decisions and a Board Circular to support their case for penalty waiver.

3. The respondent contended that the delay amounts were significant compared to excess payments, and there were continued delays even after December 2005, questioning the applicability of the Circular cited by the appellant. The respondent also argued that the show cause notice only mentioned penalty under Section 76, not Section 73, indicating non-applicability of the latter.

4. The Tribunal considered both parties' submissions, noting that the Circular exempted penal action for GTA services until December 2005 and acknowledged the software implementation issues faced by the appellant. The Tribunal recognized the stabilization period required for the software, the instances of excess payments, and the payment of service tax on imported Business Auxiliary Services, as clarified by the Mumbai High Court. Consequently, the Tribunal deemed it a fit case for penalty waiver under Section 80 of the Finance Act, 1994, and set aside the imposed penalty on the appellants.