2018 (9) TMI 254 - AT - Service Tax

Imposition of penalty - delayed payment of Service Tax - Held that - It is quite evident that Appellant was aware of his responsibility for payment of service tax. In fact he was collecting the same from his clients, (service recipients). However instead of depositing the same he was keeping the same with himself on the pretext that he was going through financial hardships. When the appellant was aware of his responsibility to the pay the tax as he was collecting the same from his customers clients. Further he was aware of his liabilities in the law as he was filing his returns indicating the tax liability - Since he was aware of his liabilities and was willfully not depositing the tax collected his conduct is not of simple ignorance but of will default to hold the tax money for personal gains - the conduct of Appellant cannot be justified and penalty as imposed by the commissioner needs to be upheld. Appeal dismissed - decided against appellant.

Summary

Issues:
- Demand of service tax along with interest
- Imposition of penalty under Section 78(1) of Finance Act, 1994

Analysis:

Demand of service tax along with interest:
The appellants were providing various taxable services but failed to pay the service tax from December 2011 onwards, leading to a show cause notice demanding service tax of ?1,93,17,035/- along with interest. The appellants admitted to the non-payment due to financial hardship but had shown the service tax payable in their returns. The Commissioner confirmed the demand and appropriated the amounts paid by the appellants towards the confirmed demands. The appellants contended that there was no intention to evade taxes and had paid a significant amount even before the investigation. However, the Commissioner imposed a penalty of ?96,58,517/- under Section 78(1) of the Finance Act, 1994, offering an option to pay a reduced penalty within thirty days. The appellants appealed against the penalty imposition.

Imposition of penalty under Section 78(1) of Finance Act, 1994:
The appellants argued that they had no intention to evade tax, had declared the tax payable, and had not suppressed any information from the department. They cited various cases in support of their argument. On the other hand, the revenue supported the penalty imposition, highlighting that the appellants had collected tax from customers but failed to deposit it, indicating an intention to evade tax. The Tribunal considered the submissions and observed that while the appellants did not contest the service tax demand and interest, they disputed the penalty. The Tribunal referred to legal precedents emphasizing the importance of timely tax payments and the absence of mens rea for penalty imposition. It concluded that the appellants, being aware of their tax responsibilities and willfully not depositing the collected tax, were not merely ignorant but willfully defaulting for personal gain. Consequently, the Tribunal upheld the penalty imposed by the Commissioner and dismissed the appeal.

In conclusion, the Tribunal upheld the demand of service tax along with interest but dismissed the appeal against the penalty imposed under Section 78(1) of the Finance Act, 1994, emphasizing the appellants' willful default in tax payment despite being aware of their obligations.