2018 (8) TMI 105 - AT - Service Tax

Penalty u/s 76 of FA - default in payment of service tax within the stipulated time i.e., by 5th of every month immediately following the calendar month in which the service is provided - Rule 6(1) of Service Tax Rule, 1994 read with Section 68 of the Act. Held that - In the present case the appellant has collected the service tax but has not deposited the same in the Government Treasury and when the show-cause notice was issued for the default, thereafter, the assessee paid the service tax along with interest - further, the only ground raised by the appellant for seeking waiver of penalty under Section 80 is that they had financial difficulties on account of which they could not pay the service tax in time but this is not a sufficient ground because they have collected the service tax from their customers. In the past also, the appellant has committed default in payment of service tax in time. No doubt the appellant had some difficulties on the financial front but that cannot be the reason for non-payment of tax once they have collected from the customers - The Tribunal in the case of Triton Communications Pvt. Ltd. 2005 (7) TMI 595 - CESTAT, MUMBAI , has held that financial crisis is not a reasonable cause for failure to pay tax. Appeal dismissed - decided against appellant.

Summary

Issues involved:
Penalty under Section 76 for default in payment of service tax within stipulated time.

Detailed Analysis:

Issue 1: Default in payment of service tax
The appellants filed three appeals against orders imposing penalties under Section 76 for default in paying service tax within the stipulated time. The appellants were engaged in providing taxable service under 'manpower recruitment or supply agency service.' They failed to discharge the service tax liability for October 2008, amounting to ?6,06,44,152. The Commissioner imposed penalties after the appellants continuously defaulted in paying service tax before the due date. The appellants argued that the delay was due to financial difficulties and delayed client payments.

Issue 2: Arguments of the parties
The appellant's counsel contended that the impugned order did not consider the facts properly. They highlighted financial difficulties and lack of intention to evade tax. The appellant requested dropping penalties under Section 76 invoking Section 80 of the Finance Act, 1994. The AR defended the order, stating the appellants collected but did not deposit the service tax, making them liable for penalties and interest. The AR cited precedents to support their argument.

Issue 3: Tribunal's analysis and decision
After considering submissions and precedents, the Tribunal found that the appellants collected service tax but did not deposit it in the Government Treasury. Despite financial difficulties, collecting tax from customers made the ground insufficient for penalty waiver. Precedents like Triton Communications Pvt. Ltd. and Rovion Tourists Promotions were cited to support the decision. The Tribunal upheld the penalties under Section 76, dismissing the appeals.

The judgment, delivered on 31.07.2018, upheld the penalties imposed on the appellants for defaulting in paying service tax within the stipulated time, emphasizing the obligation to deposit collected taxes promptly.