2019 (1) TMI 568 - AT - Service Tax

Penalty - Short payment of service tax - entire service tax liability alongwith interest was paid up before issuance of show cause notice - Held that - The appellant has established that they had paid up the entire service tax along with interest even though belatedly - also, appellants have established reasonable cause for not paying the service tax - this is a fit case to invoke Section 80 of the Finance Act, 1994. - penalty cannot be imposed - appeal allowed.

Summary

Issues:
- Short payment of service tax on various services
- Wrongly availed abatement under Notification No. 1/2006-ST for GTA service
- Demand of service tax, interest, and penalties
- Delay in paying service tax due to financial hardships
- Applicability of penalties under sections 77 and 78 of the Finance Act, 1994
- Benefit of Section 80 regarding delay in payment

Analysis:

1. The appellant was providing services of Storage and Warehousing, Cargo Handling, Renting of Immovable Property, and GTA services. During an audit, it was discovered that there was short payment of service tax on different services and incorrect availing of abatement under Notification No. 1/2006-ST for GTA service. Consequently, a show cause notice was issued to demand the service tax, interest, and penalties. The original authority confirmed the demand, interest, and imposed penalties under sections 77 and 78 of the Finance Act, 1994, which was upheld by the Commissioner (Appeals), leading to the current appeal.

2. The appellant argued that the delay in paying service tax was due to financial hardships faced during the relevant period. They contended that the entire tax liability was paid before the show cause notice was issued. The appellant paid the tax liability for the period 2009-10 immediately upon audit discovery and for 2010-11 before the show cause notice. The appellant also paid most of the interest, except for a quantified amount, which was subsequently paid before the adjudication order. The appellant claimed that the delay in payment did not warrant penalties under section 78 and requested the benefit of Section 80, citing relevant case law.

3. The respondent supported the findings of the impugned order, emphasizing that the appellant had not paid the entire interest liability before the show cause notice was issued. They argued that penalties under sub-section (3) of Section 73 would apply only if the tax liability and interest were paid before the notice. Given the appellant's default in paying service tax, the respondent asserted that the imposed penalties were lawful.

4. After hearing both sides, the appellant focused their challenge on the penalties imposed, highlighting that the entire tax liability and most interest had been paid. The adjudicating authority confirmed a specific amount as the demand, imposing equal penalties under section 78. The appellant demonstrated that they paid the service tax and interest, albeit belatedly, attributing the delay to financial difficulties and maintaining that there was no intention to evade tax payment. They argued that the audit revealed no irregularities, and the demand was accurately reflected in their accounts.

5. The Tribunal, considering the arguments presented, decided to set aside the equal penalty imposed under section 78 while upholding the demand, interest, and penalty under section 77. The Tribunal acknowledged the appellant's financial challenges and lack of intent to evade tax, deeming it a suitable case to invoke the provisions of Section 80 of the Finance Act, 1994. As a result, the appeal was partly allowed with appropriate consequential relief.

In conclusion, the Tribunal's decision addressed the issues of delayed service tax payment, penalties under the Finance Act, and the appellant's financial circumstances, ultimately modifying the impugned order to provide relief to the appellant.