2017 (11) TMI 92 - AT - Service Tax

Time limitation - on subsequent audit for the disputed period, it was detected by the audit wing that the appellant had short paid Service Tax amount of ₹ 57,390/-. By invoking the extended period of limitation, the said amount was confirmed against the appellant - Held that - Since the activities of the appellants were already in the knowledge of the Department at the time of conducting the first audit and admittedly no discrepancies were noticed by the Audit Wing, it cannot be said that there is element of suppression, fraud etc., on the part of the appellant in defrauding the Government revenue - extended period of limitation cannot be invoked for confirmation of the Service Tax demand - demand set aside - appeal allowed. Penalty u/s 78 for the period April 2004 to June, 2004 - Held that - the Department has not specifically alleged regarding non-maintenance of statutory records by the appellant. Since the appellant complied with the statutory requirement of maintenance of proper books of accounts and did not pay the Service Tax due to the reason of financial difficulties, non-payment of such tax amount cannot be a defensible ground for imposition of penalty under Section 78 ibid, which specifically provides that in case of fraud, suppression etc. such provisions can only be invoked - penalty set aside by invoking section 80. Interest liability - Held that - proper quantification of the interest amount is required in this case. Therefore, the matter is remanded to the original authority for quantification of the actual interest liability - matter on remand. Appeal allowed in part and part matter on remand.

Summary

Issues:
1. Service Tax demand for the period 2010-11 barred by limitation.
2. Service Tax demand for the period April 2014 to June 2014.
3. Imposition of penalty under Section 78 of the Finance Act, 1994.
4. Consideration of interest amount deposited by the appellant.

Analysis:

Issue 1: Service Tax demand for the period 2010-11 barred by limitation

The appellant argued that the Service Tax demand of ?57,390/- for the period 2010-11 was time-barred as it was confirmed based on an audit report for the year 2014-15, despite an earlier audit in 2013 showing no discrepancies. The Tribunal agreed, stating that since no discrepancies were found in the initial audit and the appellant's activities were known to the Department, the extended period of limitation could not be invoked. Consequently, the demand, penalties, and interest related to this amount were set aside, and the appeal was allowed in favor of the appellant.

Issue 2: Service Tax demand for the period April 2014 to June 2014

Regarding the Service Tax demand of ?6,58,650/- for the period April to June 2014, the appellant explained that due to financial difficulties, the tax amount was not initially deposited but was later paid during adjudication proceedings. The Tribunal found that since the relevant details were in the statutory books of accounts and there was no malafide intention, the benefit of Section 80 of the Finance Act, 1994 should apply. As a result, the penalty of ?3,29,325/- imposed in the impugned order was not upheld, and the appeal was allowed.

Issue 3: Imposition of penalty under Section 78 of the Finance Act, 1994

The Tribunal noted that the Department did not specifically allege non-maintenance of statutory records by the appellant for the period April to June 2004. As the appellant had complied with record-keeping requirements and the non-payment of tax was due to financial difficulties, the Tribunal held that penalty under Section 78 could not be imposed. Instead, Section 80 was applicable for non-imposition of penalty, leading to the setting aside of the penalty and allowing the appeal.

Issue 4: Consideration of interest amount deposited by the appellant

The appellant claimed that the interest amount deposited had not been considered by the original authority. The Tribunal agreed that proper quantification of the interest liability was necessary and remanded the matter to the original authority for this purpose. It was clarified that the interest already paid by the appellant should be adjusted against the determined liability.

In conclusion, the Tribunal set aside the demands, penalties, and interest related to the Service Tax demand for the period 2010-11, as well as the penalties imposed for the period April to June 2014, while remanding the matter for quantification of interest liability.