2019 (1) TMI 505 - AT - Service Tax

Waiver of penalty u/s 78 of The Finance Act 1994 - short payment of service tax - malafide intent - Held that - Unless and until the investigation could have been started the short payment of service tax could not be detected. The appellant having malafide intentions did not pay service tax in time which has been collected by them from the service recipient - Moreover the provisions of Section 78 w.e.f. 14.02.2005 are not applicable to the facts of this case as the appellant did not pay the service tax along with interest and 50% penalty within 30 days of communication of the adjudication order; therefore the appellant did not require any immunity from this Tribunal for reduction of penalty under Section 78 of the Act. Immunity from penalty cannot be granted - appeal dismissed - decided against appellant.

Summary

Issues:
Appeal against penalty under Section 78 of The Finance Act, 1994 seeking immunity.

Analysis:
The appellant provided security services without disclosing the amount, leading to a short payment of service tax. The Department discovered this through Form-26AS of the Income Tax Act/Rules. An investigation revealed a liability of ?19,87,177 for service tax, of which the appellant paid ?3 lakhs but failed to pay the remaining amount. A show cause notice was issued demanding the outstanding tax, interest, and penalties under Sections 76, 77, and 78. The adjudication confirmed the demand, interest, and a penalty equal to the service tax, along with penalties under Section 77. The appellant sought immunity from the penalty under Section 78, claiming the incorrect figures were due to the mental health issues of the person handling the matter, not intentional evasion.

The appellant argued for immunity under Section 78, citing the amended provision allowing a penalty of up to 50% of the service tax. The respondent reiterated the findings of the impugned order. The Tribunal considered both sides' submissions and found that the investigation was necessary to detect the short payment of service tax. The appellant's failure to pay on time, despite collecting the tax from service recipients, indicated malafide intentions. The Tribunal noted that the appellant did not meet the conditions for immunity under Section 78 as they did not pay the tax, interest, and 50% penalty within 30 days of the adjudication order. Consequently, the Tribunal upheld the impugned order, denying the appellant's request for immunity and reducing the penalty under Section 78.

In conclusion, the Tribunal dismissed the appeal, stating that the appellant was not entitled to immunity for a penalty reduction under Section 78 of the Act. The decision was dictated and pronounced in open court.