2019 (1) TMI 778 - AT - Service Tax

Penalty u/s 76 and 78 of FA - short-payment of service tax - Business Support Service - suppression of facts - Held that - From the facts on records as well as the submissions made, it is seen that the assessee has discharged the service tax along with interest. The show cause notices have been issued invoking sections 73 and 73A of the Finance Act, 1994. As per Section 73A, the assessee is duty bound to deposit the amount collected as service tax with the Central Government. However, the said section does not provide for imposition of penalty for non-failure to comply with the said provision. The show cause notices have invoked section 73 also. The contention of the department that there is suppression of facts with intention to evade payment of service tax is not supported with any evidence. For these reasons, there are no grounds to impose penalty under section 78 - there are no ingredients to impose penalty under section 78. The appellants have established that the delay in payment of service tax was due to the default of one of the clients and consequent financial hardships. They have given reasonable cause for failure and we hold that it is a fit case for invocation of Section 80 to set aside the penalties. The penalty imposed under sections 76 and 78 in these appeals cannot sustain - impugned orders are modified to the extent of setting aside the penalties imposed under sections 76 and 78 of Finance Act, 1994 without disturbing the demand or interest thereon - appeal allowed in part.

Summary

Issues Involved:
- Imposition of penalty under sections 76 and 78 of the Finance Act, 1994.
- Verification of payments made by the appellant.
- Applicability of penalty provisions based on the facts and circumstances.

Analysis:

Imposition of Penalty under Sections 76 and 78:
The appeals before the Appellate Tribunal involved the imposition of penalties under sections 76 and 78 of the Finance Act, 1994, concerning the short-payment of service tax under the category of Business Support Service. The Assessee contended that the penalties under section 78 were not sustainable due to financial constraints caused by a client's default. The Tribunal noted that there was no deliberate act on the Assessee's part to evade service tax payment, as evidenced by financial hardships faced. The Tribunal cited relevant case laws and held that there was no suppression of facts warranting penalty under section 78. The penalties under sections 76 and 78 were set aside, invoking Section 80 of the Finance Act, 1994.

Verification of Payments Made by the Appellant:
One of the issues raised in the appeals was the verification of payments made by the Appellant towards the service tax liability. The Department contended that certain payments had not been adequately verified, leading to doubts about the correctness of the service tax liability. However, the Tribunal found that the Commissioner had appropriately appropriated the amount already paid by the Appellant, and the Department's contentions lacked factual basis. The appeal filed by the Department on this ground was dismissed.

Applicability of Penalty Provisions Based on Facts and Circumstances:
The Tribunal thoroughly analyzed the facts and circumstances of the case to determine the applicability of penalty provisions under sections 76 and 78 of the Finance Act, 1994. It emphasized the importance of establishing deliberate acts to evade service tax payment for the imposition of penalties. Considering the financial hardships faced by the Assessee due to a client's default, the Tribunal concluded that there were no grounds for imposing penalties under sections 76 and 78. The penalties were set aside, maintaining the demand and interest, while not interfering with the penalty imposed under section 77. The appeals filed by the Assessee were partly allowed, and those filed by the Department were dismissed.

In conclusion, the Appellate Tribunal's judgment addressed the issues of penalty imposition, payment verification, and the application of penalty provisions based on the factual circumstances of the case. The decision provided detailed reasoning, citing relevant legal precedents, and ultimately set aside the penalties under sections 76 and 78, while dismissing the Department's appeals and partly allowing those filed by the Assessee.