2017 (10) TMI 661 - AT - Service Tax

Non-payment of service tax - Security Services - penalty - whether such non-payment of service tax by the appellant was on account any one of the ingredients mentioned in the said section 78? - Held that - reliance placed in the case of Union of India Vs Rajasthan Spinning Mills 2009 (5) TMI 15 - SUPREME COURT OF INDIA laying down that when the statute provides mandatory penalty, the question of payment of duty before or after notice cannot alter liability to penalty. Inasmuch as, the conditions of section 11AC of Central Excise Act in that case were found to be satisfied, the Hon ble Supreme Court observed that payment of differential duty before the issuance of the show-cause notice cannot be adopted as a reason for setting aside the imposition of penalty - In the present case, it already stands observed that non-payment was on account of malafide, the imposition of penalty under section 78 cannot be set aside on the ground of the appellant having deposited the entire duty and interest prior to the issuance of the show-cause notice - penalty upheld - appeal dismissed - decided against appellant.

Summary

Issues involved:
Imposition of penalty under section 78 of the Finance Act, 1994 for non-filing of returns and non-payment of service tax.

Detailed Analysis:

1. Imposition of Penalty: The appellant, engaged in "Security Services," failed to file returns and pay service tax for specific periods, leading to the imposition of a penalty under section 78 of the Finance Act, 1994. The appellant's argument that penalty imposition was unjustified due to financial constraints was countered by the departmental representative, highlighting the mandatory nature of penalties for non-payment or non-filing. The department argued that the appellant's actions amounted to malafide conduct, justifying penalty imposition under section 78.

2. Legal Obligations and Malafide Intent: The judgment emphasized the appellant's legal obligation to file returns and pay service tax, regardless of financial difficulties. The failure to disclose and pay tax was seen as intentional, as the appellant collected service tax from customers but did not remit it to the authorities. This intentional non-compliance was viewed as malafide, warranting penalty under section 78.

3. Application of Section 78: The judgment referred to precedents establishing that penalty under section 78 is mandatory in cases of proven suppression of facts. The appellant's non-payment of service tax, despite being registered and collecting tax from customers, was deemed intentional and fell within the purview of section 78.

4. Precedents and Legal Interpretation: The judgment cited relevant case laws to support the imposition of penalties for suppression of facts. Additionally, the appellant's argument regarding payment of service tax before the issuance of a show-cause notice was refuted, as malafide intent negated the applicability of certain provisions cited by the appellant.

5. Rejection of Claims: The judgment dismissed the appellant's claims regarding reasonable cause for non-payment, reduction of penalty, and applicability of specific sections to justify their actions. The appellant's failure to avail the option of reduced penalty within the stipulated time further weakened their case.

6. Final Decision: Ultimately, the tribunal upheld the imposition of the penalty under section 78, rejecting the appellant's contentions. The appellant's deliberate non-compliance and malafide intent were key factors in affirming the penalty. The appeal was consequently dismissed, emphasizing the legal obligation to comply with tax laws and the repercussions of intentional non-payment.

This detailed analysis encapsulates the key legal arguments, interpretations, and precedents considered in the judgment regarding the imposition of penalties for non-payment and non-filing of returns under section 78 of the Finance Act, 1994.