2019 (1) TMI 509 - AT - Service Tax

Penalty u/s 78 - non-payment of service tax collected for providing telecom services and work contract services - short payment for other period - cash crisis/ fund shortage was cited as the ground for such non-discharge of duty liability but on 18.08.2011 and 19.08.2011, the appellant was able to discharge the entire amount, which is just within two days from the date of raid conducted by the respondent department - intent to evade or not - Held that - Appellant was not fling ST-3 returns and would have continued to evade service tax by suppressing material facts, had there been no intervention by the department. This being the factual aspect, it cannot be said that appellant had a bonafide intention to discharge duty liability and it could not do so due to incapacity - also, no material is forthcoming that appellant was ignorant of its duty liability and had in fact furnished its statement by way of ST3 returns to the department indicating its duty liability. Section 78 requires that such fact of wilful suppression, misstatement etc. had to be established by the department on whom the burden of proof lies and department has successfully discharged the same by getting the same admitted by the partner of appellant firm which remained unchallenged by the appellant all throughout the proceedings - Therefore the onus has shifted to the appellant which is supposed to disprove the allegation of the department but both stand taken by the appellant regarding delayed payment and cash crunch could not be substantiated by it as it could generate cash of huge amount for payment within two days of visit by the departmental officials to is premises and in not producing any documentary proof regarding non-payment or delayed payment by the service recipient namely Tata Telecommunications. Appeal dismissed - decided against appellant.

Summary

Issues:
Imposition of penalty under Section 78 of the Finance Act, 1994 against non-payment of service tax collected for providing telecom services and work contract services.

Analysis:
The appellant company challenged the imposition of penalty under Section 78 of the Finance Act, 1994, for non-payment of service tax collected for providing telecom and work contract services. The appellant had been providing these services since 2006, including laying cables for major clients like Tata Telecommunications and BSNL. Following a raid by the anti-evasion wing, it was discovered that the appellant had not paid service tax amounting to ?47,65,673 during 2010-2011 and ?71,476 for other periods, and had not filed ST-3 returns post-March 2009. The appellant attributed the non-payment to delayed bill clearance and cash flow issues. Despite paying the outstanding amount promptly after the raid, a show-cause notice was issued in 2014, invoking the extended period due to alleged suppression of duty liability. The adjudicating authority confirmed the duty liability, interest, and penalty, which was upheld by the Commissioner (Appeals), leading to the appeal before the Tribunal.

During the appeal, the appellant argued that they were not granted the benefit under Section 73(3) of the Finance Act, 1994, and requested the waiver of penalty, citing various judicial decisions. The appellant claimed they maintained records and accounts, showing no intention to evade tax. In response, the respondent department supported the Commissioner (Appeals) order, emphasizing that the appellant had collected but not deposited service tax, indicating suppression of facts. The department argued that the appellant intentionally withheld tax, as revealed by a partner's statement.

After hearing both sides and reviewing the case records and legal precedents, the Tribunal observed that the appellant had collected but not paid service tax, citing cash flow issues as the reason. However, the appellant managed to pay the entire amount promptly after the raid, indicating knowledge of the liability. The Tribunal noted that the appellant failed to prove ignorance of duty liability or prompt payment receipt from clients. The burden of proof shifted to the appellant, which could not substantiate claims of delayed payment or cash crunch. The cited case laws were deemed irrelevant to the appellant's case, as they did not address the suppression of tax liability issue. Consequently, the Tribunal dismissed the appeal and upheld the Commissioner (Appeals) order, confirming the penalty.

In conclusion, the Tribunal dismissed the appeal, affirming the Commissioner (Appeals) order regarding the imposition of penalty under Section 78 of the Finance Act, 1994, against the appellant for non-payment of service tax collected for telecom and work contract services.