2009 (2) TMI 199 - AT - Service Tax

Delay in payment of service tax interest and penalty Section 76 and Section 80 Quantum held that - The Appellant has chosen to discharge the due tax liability from June 2005 to February 2006 on one day i.e. 31-3-2006. The Appellant should not get any immunity from levy of interest. Therefore the levy of Service Tax and interest is confirmed - considering that the appellant was dealt under law at the early stage of implementation of law, levy of harsh penalty of Rs. Three lakhs shall be disproportionate. Finding that there was a delay of less than one year in an average, I reduce the penalty from Rs. 3,89,148/- to Rs. 50,000/- (Rs. Fifty thousand) and consider the same to be just and proper as a preventive dose to protect interest of justice. Accordingly, the penalty is reduced to Rs. 50,000/-.

Summary

Issues: Liability for tax, delay in payment, penalty reduction

Liability for Tax:
The case involved an appeal by a Manpower Recruitment Agency regarding their liability for service tax under the Finance Act, 1994. The appellant voluntarily registered under the law, and the liability arose from the date of law implementation. The appellant argued financial constraints prevented timely discharge of tax liability. The authorities confirmed the admitted liability, noting a delay in payment from June 2005 to February 2006. The Appellate Tribunal found no reasonable cause considered for the delay, and upheld the levy of service tax and interest.

Delay in Payment:
The appellant acknowledged the delay in discharging the tax liability, choosing to pay the due amount on a single day in March 2006. The Tribunal observed the delay and emphasized that the appellant should not be immune from the levy of interest. The order did not mention any reasonable cause for the delay, and the Appellate Authority did not consider the financial constraint argument raised by the appellant. Despite the delay, the Tribunal confirmed the levy of service tax and interest.

Penalty Reduction:
Regarding the penalty imposed, the Tribunal noted that the appellant was subject to the law in its early implementation stage. Considering the circumstances, the Tribunal deemed the initial penalty of Rs. 3,89,148/- as disproportionate. The penalty was reduced to Rs. 50,000/- as a preventive measure to ensure justice. The confirmation of the demand for tax and interest remained, with the penalty aspect being the only modification. The appeal was partly allowed, with the penalty reduced to Rs. 50,000/-.

This judgment highlights the importance of timely compliance with tax liabilities, the consideration of financial constraints, and the discretion of authorities in determining penalties based on the circumstances of each case.