2018 (5) TMI 1237 - AT - Service Tax

Penalties - non-submission of the said ST-3 Returns - applicability of section 70 of FA - Held that - the appellant though was registered under taxable service provider but for the year 2005-08, he had not rendered any taxable service. Though, this fact was not known to the Department till they served the letter, upon the appellant as are mentioned in the show cause notice. But in view of Show Cause Notice being silent about any tax liability of appellant during the relevant period, it stands clear that the appellant was not liable to pay tax - since for the period 2005 to the period 2008 the appellant was not liable to pay tax, he is out of the ambit of Section 70 of Finance Act, 1944 Any penalty imposed upon him under Section 7C of Service Tax Rules is not applicable as the word used in the said Section is also assessee and the appellant in the given circumstances does not fall under that category for that particular period. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
Non-filing of ST-3 returns for a specific period, imposition of late fee under Service Tax Rules, appeal against the order reducing the late fee, applicability of Circular and case laws in reducing penalties, interpretation of Section 70 of the Finance Act, liability to pay service tax, definition of assessee, sustainability of penalties imposed.

Analysis:
The judgment revolves around the non-filing of ST-3 returns by the appellant for the period from October 2008 to June 2012. A show cause notice was issued to the appellant for not submitting the required returns, leading to the imposition of a late fee of ?1,60,000 under Rule 76 of Service Tax Rules, 1994. The Commissioner (Appeals) partially allowed the appeal, reducing the late fee to ?70,000.

The appellant challenged this order before the Tribunal, arguing based on Circular No. 97/08/070ST dated 23.08.2007 and citing precedents like Suchak Marketing Pvt. Ltd. and Amrapali Barter Pvt. Ltd. The Department contended that the penalty had been waived, and the late fee was already reduced significantly, making the appeal unjustifiable.

The Tribunal analyzed Section 70(1) of the Finance Act, which mandates every person liable to pay service tax to assess and furnish returns. The definition of an assessee under Section 65 includes a person liable to pay service tax. Despite arguments regarding the Circular's applicability, it was found that the appellant had not provided taxable services during the relevant period, making them not liable to pay tax.

Consequently, the Tribunal held that the appellant, not being liable to pay tax for the specific period, was outside the scope of Section 70 of the Finance Act. Therefore, any penalties imposed under Section 7C of Service Tax Rules were deemed inapplicable. The imposed penalty of ?70,000 was considered unsustainable, leading to the allowance of the appeal. The appellant was directed to file 'NIL' returns for each financial year for intimation to the competent authority.

In conclusion, the judgment clarifies the interpretation of the law regarding service tax liability, the definition of an assessee, and the applicability of penalties based on tax liability, ultimately ruling in favor of the appellant and setting aside the imposed penalty.