2019 (1) TMI 825 - AT - Service Tax

Failure to discharge service tax - amount collected but not paid to the Government - recovery alongwith interest and penalty - extended period of limitation - Held that - The appellant had neither disputed liability of Service Tax on supply of the Tangible Goods Service nor refuted the allegations that the Service Tax amount has been collected from the customers, as is evident from the invoices enclosed with the appeal memorandum. Only reason cited for non-payment of Service Tax, though collected, was due to financial difficulties. The appellant had continuously failed to discharge the Service Tax from October-2010 to March-2014 even though they had collected the Service Tax amount from their customers - extended period of limitation is applicable and penalty confirmed - appeal dismissed - decided against appellant.

Summary

Issues: Failure to pay Service Tax collected from customers, applicability of extended period of limitation, imposition of penalty

Failure to pay Service Tax collected from customers:
The appellant provided taxable services but failed to discharge the Service Tax on the same, despite collecting a significant amount from customers. The show cause notice was issued for recovery of the unpaid amount, interest, and penalty. The appellant did not dispute the liability of Service Tax on the supply of tangible goods or the fact that they collected the Service Tax from customers. The only reason given for non-payment was financial difficulties. The tribunal found that the appellant continuously failed to pay the Service Tax from October 2010 to March 2014, even though they collected it from customers. The tribunal upheld the demand for the unpaid Service Tax.

Applicability of extended period of limitation:
The Revenue argued that there was no dispute that the appellant provided taxable services, collected Service Tax from customers, but failed to deposit it with the exchequer. The adjudicating authority confirmed the Service Tax liability invoking the extended period of limitation and imposed a penalty. The tribunal agreed with the Revenue's submission, noting that the appellant's failure to pay the collected Service Tax over a significant period despite financial difficulties justified the application of the extended period of limitation. The tribunal found no merit in the appellant's argument against the applicability of the extended period of limitation and upheld the penalty imposed.

Imposition of penalty:
The tribunal upheld the penalty imposed on the appellant for failing to pay the Service Tax collected from customers. Despite the appellant's claim of financial difficulties as the reason for non-payment, the tribunal found that the continuous failure to discharge the Service Tax over several years was not justified. The tribunal concluded that the penalty was correctly imposed along with the confirmed Service Tax liability, and dismissed the appeal.

This judgment highlights the importance of timely payment of collected taxes and the consequences of failing to fulfill tax obligations, even in cases of financial difficulties. The tribunal's decision underscores the significance of complying with tax laws and the authority's power to impose penalties for non-compliance.