2018 (7) TMI 1215 - AT - Service Tax

Penalty u/s 77 and 78 of FA - No intent to evade - tax deposited before issuance of SCN - Held that - It is admitted facts that the tax short paid is part of the admitted tax not deposited as per the ST-3 returns, filed by the appellant, though belatedly - the appellant has taken care to deposit the tax in arrears before the passing of the adjudication order. There is no matter of contumacious conduct, suppression of facts from revenue or false statement of account, is made out against the appellant - in view of the declaration made in return filed before the issuance of show cause notice by the appellant, there is no suppression of facts or falsification statement of account (s) is made out - penalty not warranted. Penalty set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Penalty imposed under Section 78 of the Act for failure to pay service tax regularly.
2. Default in filing ST-3 returns and non-payment of service tax leading to penalty under Section 77 of the Finance Act, 1994.
3. Appeal against Order-in-Appeal confirming the penalty.

Analysis:
Issue 1:
The appellant, a provider of 'Security Agency Services', was penalized under Section 78 of the Act for not paying service tax regularly. The appellant had disclosed their turnover, but a discrepancy was found during an audit, leading to a short payment of service tax. The appellant argued that the shortfall was due to a lack of funds, not deliberate evasion. The Tribunal noted that the appellant had deposited a significant amount before the show cause notice and had paid interest for late payment. Considering these factors, the Tribunal found no deliberate default or intention to evade tax, setting aside the penalty under Section 78.

Issue 2:
The appellant had failed to file ST-3 returns regularly and pay service tax, resulting in a penalty under Section 77 of the Finance Act, 1994. The appellant contended that the non-payment was due to diverting funds for medical treatment of the proprietor's seriously ill mother. The Tribunal observed that the tax shortfall matched the admitted tax in their returns, indicating no concealment or contumacious conduct. The appellant had also paid interest for late tax payment. Consequently, the Tribunal concluded that there was no suppression of facts or deliberate falsification, leading to the setting aside of penalties under Sections 77 and 78.

Issue 3:
The appellant appealed against the Order-in-Appeal confirming the penalties. The Commissioner (Appeals) had upheld the penalties, prompting the appeal before the Tribunal. After considering the arguments and facts presented, the Tribunal set aside the penalties imposed under Sections 77 and 78. The adjudicating authority was directed to verify any additional amounts payable and inform the appellant for prompt payment, ensuring compliance with the tax regulations.

In conclusion, the Tribunal's decision focused on the lack of deliberate default or intention to evade taxes by the appellant, leading to the setting aside of penalties under Sections 77 and 78 of the Act. The case highlighted the importance of timely tax compliance and genuine reasons for payment delays, ultimately emphasizing fair adjudication based on factual and legal considerations.