2017 (11) TMI 351 - AT - Service Tax

Penalty u/s 76 and 78 of FA - delay in payment of tax - invocation of Section 73(3) of the Finance Act, 1994 - extended period of limitation - Held that - the question of financial hardship does not arise as the liability was to be discharged on amounts received. It is also seen that the figure mentioned in the Balance Sheet do not match with the returns filed by them. The appellant have also admitted their liability to Service Tax and admitted to failure to deposit the same, in these circumstances invocation of period of limitation is justified and consequently penalties under Section 76 & 78 become are imposable. Invocation of section 80 - The appellant have sought benefit of Section 80 on the ground that their transactions are recorded in their Books of Account and non-payment of Service Tax to the appellant by their client - Held that - The liability of appellant arise by receipt of payment from the client. There cannot be a liability if payment has not been received, during the impugned order. Thus non receipt of Service Tax amount cannot come in way of their ability to pay. The fact that transactions are recorded in Books of Account is not material, as they needed declare the same in the ST-3 return - By not declaring the values in the ST-3 return they have failed to shows the correct liability, in these circumstances Section 80 is not applicable. Appeal dismissed - decided against appellant.

Summary

Issues:
Confirmation of demand and imposition of penalty under Section 76 & 78 of the Finance Act, 1994 for short payment of duty amount.

Analysis:
The appellant, engaged in providing manpower services, contested the show-cause notice issued for alleged short payment of duty amounting to ?12,71,791/- for the period 2005-06 to 2010. The appellant voluntarily paid ?8,50,562/-, which was proposed for appropriation in the notice. The appellant argued that the notice was issued after more than three years from the audit conducted in January 2008, and all transactions were disclosed in the Books of Account, invoking Section 73(3) of the Finance Act, 1994. The appellant also claimed that the option of paying 25% penalty under Section 78(1) was not given, citing a Tribunal decision mandating this option.

The Revenue contended that the appellant's failure to pay the duty amount over three years indicated an intent to evade payment, regardless of the date of revenue's knowledge. The Revenue highlighted that the appellant did not pay the duty liability even after the audit and had not declared the correct value in their returns. The Revenue argued that Section 73(3) does not apply when duty is leviable due to fraud or collusion under Section 73(4) of the Finance Act.

The Tribunal found that the appellant did not deposit the exact Service Tax amount due to financial hardship, as claimed due to non-payment by clients. However, the Tribunal clarified that Service Tax is payable on a receipt basis, and the appellant is liable to pay tax only on amounts received. The mismatch between the Balance Sheet figures and filed returns, along with the admission of failure to deposit the Service Tax, justified the invocation of the limitation period and imposition of penalties under Section 76 & 78.

Regarding penalties, the Tribunal noted that simultaneous penalties under Section 76 & 78 could not be imposed after May 10, 2008, and correctly imposed penalties under Section 76 only for the period before 2008. The appellant's claim for the benefit of Section 80 was rejected as the non-receipt of Service Tax did not absolve them of the liability to pay, especially when transactions were recorded but not declared in returns. The Tribunal dismissed the appeal, emphasizing the importance of correctly declaring liabilities in returns despite financial hardships.

In conclusion, the Tribunal upheld the confirmation of demand and imposition of penalties under Section 76 & 78, emphasizing the need for accurate declaration of liabilities and timely payment of Service Tax, even in cases of financial difficulties.