2017 (12) TMI 1095 - AT - Service Tax

Penalty u/s 76 - invocation of section 80 - case of appellant is that service tax could not be paid on account of financial difficulties and he will pay the balance of service tax at the earliest - Held that - the appellant has failed to pay the service tax liability till today and unless he pays the service tax liability, he cannot claim benefit under Section 80 for dropping penalty u/s 76 of the FA - appeal dismissed - decided against appellant.

Summary

Issues:
- Appeal against rejection of appeal by Commissioner (A)
- Imposition of penalty under Section 76 of the Finance Act, 1994
- Benefit under Section 80 of the Finance Act

Analysis:
1. Appeal Against Rejection of Appeal by Commissioner (A):
The appellant filed an appeal against the order dated 11.1.2016 passed by the Commissioner (A), which rejected the appellant's appeal. The appellant, registered under Service Tax, had filed ST-3 returns for April 2008 to September 2010, disclosing a service tax liability of ?15,42,325 but had only paid ?3,03,995 as service tax. The Department issued a show-cause notice proposing to demand the full service tax amount and impose a penalty under Section 76 of the Finance Act, 1994. The original authority confirmed the demand and imposed a penalty, leading to the appellant's appeal before the Commissioner (A), which was rejected. The appellate tribunal upheld the Commissioner (A)'s decision, stating that the appellant had failed to pay the service tax liability, making the dismissal of the appeal appropriate.

2. Imposition of Penalty under Section 76 of the Finance Act, 1994:
The appellant argued that the penalty imposed under Section 76 of the Finance Act, 1994 was not legally sustainable. The appellant cited financial difficulties as the reason for not being able to pay the full service tax liability and expressed willingness to pay the remaining amount promptly. The appellant requested the benefit under Section 80 of the Finance Act and the dropping of the penalty. However, the learned AR defended the penalty, highlighting that the appellant had only paid a fraction of the total tax liability over a period of seven years. The tribunal, after considering both parties' submissions and reviewing the impugned order, found no fault in the Commissioner (A)'s decision to dismiss the appeal. The tribunal emphasized that the appellant must clear the service tax liability before claiming benefits under Section 80 and upheld the imposition of the penalty under Section 76.

3. Benefit under Section 80 of the Finance Act:
The appellant sought the benefit under Section 80 of the Finance Act, which provides for the reduction or waiver of penalties under certain circumstances. However, the tribunal ruled that the appellant could not claim this benefit until the full service tax liability was paid. The failure to clear the tax liability was a crucial factor in the tribunal's decision to dismiss the appeal and uphold the penalty imposed under Section 76 of the Finance Act. The tribunal's decision emphasized the importance of meeting tax obligations before seeking relief under the provisions of the Finance Act.