2018 (3) TMI 355 - AT - Service Tax

Penalty u/s 76 and 78 - delayed payment of service tax - delayed filing of returns - Held that - it is apparent that M/s. Venkateshwara Earthmovers failed to pay the duty in the entire period of three years. They had also not filled any ST-3 returns however they had already taken registrations. The amounts paid by the appellants in cash also take the shape of duty only when the same are adjusted by filling the return against the duty liability. In absence of such adjustment of amounts paid against a existing duty liability the said payments do not take the shape of payment of service tax. Thus it is apparent that M/s. Venkateshwara Earthmovers by not filling return for a period of over three years and not by paying tax despite collecting the same from the service recipients even though they had taken the registration have made themselves liable to penalty under Section 78 also. The penalty equal to the duty amount confirmed under Section 78 is imposed however the noticee is given an option to pay only 25% of the penalty amount - appeal allowed in part.

Issues:
- Appeal filed by M/s. Venkateshwara Earthmovers and Revenue against the order of Commissioner confirming demand of Service Tax and interest while dropping penalty under Section 76 and 78 of the Finance Act.
- Argument regarding delayed filing of returns by M/s. Venkateshwara Earthmovers and the justification for not imposing interest and penalty.
- Revenue's reliance on the impugned order and justification for demanding interest and penalty.
- Analysis of the impugned order and the decision of the Tribunal in a similar case.
- Failure of M/s. Venkateshwara Earthmovers to pay duty and file returns for over three years leading to the imposition of penalty under Section 78.
- Decision on the appeal filed by the revenue and imposition of penalty equal to the duty amount under Section 78.

Detailed Analysis:

1. Delayed Filing of Returns by M/s. Venkateshwara Earthmovers:
- M/s. Venkateshwara Earthmovers argued that despite not filing ST-3 returns, they maintained records allowing them to utilize cenvat credit to discharge the duty liability for the period in question.
- They contended that the late filing of returns did not warrant interest payment as they had timely discharged the entire liability before filing revised returns.
- The appellant emphasized that the credit available to them at the material time justified their actions, and the penalty under Section 76 & 78 should not be imposed.

2. Revenue's Justification for Demanding Interest and Penalty:
- The Revenue, relying on the impugned order, argued that there was a clear default on the part of M/s. Venkateshwara Earthmovers in not discharging the duty liability, justifying the imposition of penalty under Section 76 & 78.

3. Analysis of Impugned Order and Tribunal's Decision:
- The Tribunal analyzed the impugned order and cited a previous decision to support the demand of interest. The decision highlighted the importance of actual payment of tax, either in cash or through cenvat credit, and the liability to pay interest based on the due date of payment.
- The Tribunal noted that duty paid for input/services becomes cenvat credit only upon claim through filing a return, emphasizing the necessity of proper adjustments against duty liability.

4. Failure of M/s. Venkateshwara Earthmovers and Imposition of Penalty:
- M/s. Venkateshwara Earthmovers' failure to pay duty and file returns for over three years led to the imposition of penalty under Section 78.
- The appellant's argument that payments in cash constituted duty payment was dismissed, emphasizing the importance of fulfilling obligations under the cenvat credit rules.

5. Decision on the Appeal by the Revenue:
- The appeal filed by the revenue was allowed, imposing a penalty equal to the duty amount confirmed under Section 78. The noticee was given the option to pay only 25% of the penalty amount, subject to fulfilling payment conditions within 30 days.
- No penalty under Section 76 was imposed based on a precedent, and the cross-objection was also disposed of accordingly.

This detailed analysis covers the arguments presented, the Tribunal's assessment, and the final decision regarding the appeal and penalties imposed in the case.

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