2018 (6) TMI 659 - AT - Service Tax

Penalty u/s 78 - Short payment of service tax - Erection, Commission and Installation services - case of appellant is that there is a delay in paying the service tax for the reason that there was unrest in the appellant s organization due to strike by employees - Held that - Though notices were issued on the client M/s.SISCO Ltd., the value of the services rendered were not received by them. The payment of service tax was delayed due to financial hardship and later the company was amalgamated with M/s.JSW Steel Ltd. in 2007 - also, the appellant has put forward reasonable cause for failure to discharge the service tax. In view thereof, the penalty imposed u/s 78 of the Finance Act requires to be set aside - demand of duty with interest upheld - appeal allowed in part.

Summary

Issues:
Short-payment of service tax under Erection, Commission, and Installation services; Penalty imposed under Section 78 of the Finance Act.

Analysis:
The case involved the appellants who were issued a show cause notice for the short-payment of service tax under specific categories. The original authority confirmed the demand, interest, and penalties, which were upheld by the Commissioner (Appeals), leading to the appeal before the Tribunal.

Regarding the period from 11/2007 to 3/2009, the appellant's counsel argued that the delay in paying service tax was due to unrest in the organization caused by a strike, resulting in delayed wage payments. The appellant's unit was later amalgamated and taken over by another company, which led to delayed service tax payments due to difficulties in receiving payments from the awarder company. The appellant invoked Section 80 of the Finance Act to request setting aside the penalty, emphasizing that the delay was not intentional and that a major part of the demand was paid before the Order-in-Original.

After hearing both sides, the Tribunal found merit in the appellant's argument that the short-payment of service tax was due to financial hardship caused by the strike and pending payments. The appellant's consistent plea and reasonable cause for failure to discharge the service tax were considered valid. Consequently, the Tribunal held that the penalty imposed under Section 78 of the Finance Act should be set aside. The impugned order was modified to exclude the penalty while maintaining the demand for service tax and interest. The appeal was partly allowed based on these findings.

In the operative portion of the order pronounced in open court, the Tribunal set aside the penalty imposed under Section 78 without affecting the demand for service tax or interest, thereby partially allowing the appeal in favor of the appellant.