2018 (9) TMI 912 - AT - Service Tax

Man Power Recruitment or Supply Service - service tax collected but not paid within prescribed dates - demand alongwith Interest and Penalties - Held that - The appellants discharged the tax liability, though belatedly, along with interest thereon - the reasons of bad financial health put forth by the Ld. Consultant can be considered as the reasonable cause for their failure to discharge the tax liability in time. Penalties u/s 76 and 77 set aside by invoking section 80 - the late fee of ₹ 2000/- imposed under Rule 7C of the Service Tax Rules, 1994 for belated filing of the ST3 Returns upheld - demand of Service tax also upheld - appeal allowed in part.

Summary

Issues:
Imposition of penalty under Sections 76 and 77 of the Finance Act, 1994 on the appellant for not paying service tax liability on time.

Analysis:
The Appellate Tribunal CESTAT CHENNAI addressed the issue of penalty imposition under Sections 76 and 77 of the Finance Act, 1994 on the appellant for failing to pay the service tax liability on time. The appellants supplied manpower to a company and were required to discharge service tax liability under "Man Power Recruitment or Supply Service." The records revealed that the appellants had not paid the service tax liability of ?4,79,636/- on the gross amount of ?46,56,658/- collected during April 2009 to September 2009 within the prescribed dates, although it was paid belatedly with interest. An adjudication order confirmed the demand for tax liability and imposed penalties, which was upheld by the lower appellate authority. The appeal before the forum focused solely on the issue of penalty imposition.

During the hearing, the appellant's consultant explained that financial hardship prevented timely remittance of the tax liability, but the entire tax liability along with interest was paid before the adjudication order. The consultant argued that penalties should be set aside considering the circumstances. On the contrary, the respondent supported the impugned order.

After hearing both sides and examining the facts, the Tribunal noted that the appellants did discharge the tax liability, albeit belatedly, along with interest. The Tribunal considered the financial difficulties cited by the consultant as a reasonable cause for the delay in tax payment. Consequently, the Tribunal invoked Section 80 and set aside the penalties under Sections 76 & 77 of the Act. However, the late fee of ?2000/- imposed for delayed filing of ST3 Returns was not interfered with. It was clarified that the demand of ?4,79,636/- confirmed by the original authority and upheld by the lower appellate authority remained unchanged.

In conclusion, the appeal was partially allowed with the penalties under Sections 76 & 77 being set aside due to the reasonable cause of financial hardship leading to the delayed tax payment, while the late fee for filing returns was upheld.