2019 (1) TMI 1041 - AT - Service Tax

Penalty u/s 76 and 78 of FA - Non-payment/delayed payment of Service Tax - period from 10/2002 to 2/2009 - the appellant has been continuously defaulting the payment of Service Tax over the years and periodical SCNs have been issued - Held that - The delay in payment of Service Tax by itself would not reveal intent to evade payment of duty and for the reason that there has been a delay in payment of Service Tax, fraud, suppression, collusion, etc. cannot be alleged. The statute has provided for payment of interest for delayed payment of Service Tax. It means that statute has provided for cases/situations where there is a possibility of payment of Service Tax. Moreover, there is a penalty under Section 76 for delayed payment. Therefore, invoking of Section 78 for delayed payment in itself is not acceptable. The penalty under Section 78 for the period 10/2002 to 8/2007 was either not proposed or dropped by Commissioner and for the period 5/2008 to 2/2009, penalty under Section 78 has not been proposed at all in the SCN. This being the situation, proposal and confirmation of penalty under Section 78 during the period 9/2007 to 10/2007 alone defies logic as there was no change in the circumstances or the procedure adopted by the appellants. The ingredients of Section 78 are not fulfilled as no suppression, fraud etc. can be alleged where the Department is well aware of the practice adopted by the appellants and SCNs have been issued continuously. As discussed above, penalty under Section 78 was not even proposed in the subsequent SCNs - penalty u/s 78 not imposable - However, due to continuous default in payment of Service Tax, the appellants are liable to pay penalty imposed under Section 76. The appeals are partly allowed by confirming duty demanded and penalty imposed under Section 76. However, penalty imposed under Section 78 of the Finance Act, 1994 is set aside.

Summary

Issues:
Non-payment/delayed payment of Service Tax, imposition of penalties under Section 76 and Section 78 of Finance Act, 1994, contesting penalties based on various grounds, interpretation of Section 76 and Section 78, applicability of reasonable cause for failure, retrospective effect of penalty provisions, continuous default in payment of Service Tax, intent to evade payment of Service Tax, suppression of facts, dismissal of appeal by the Bench, setting aside penalty under Section 78.

Analysis:
The case involved Adecco Flexi One Work Force Solution Ltd. contesting penalties imposed for non-payment/delayed payment of Service Tax. The appellants argued that delays were due to various reasons, including cash flow constraints and delays in Income Tax refunds. They also cited legal judgments to support their case, including the substitution of penalty provisions in the Finance Act, 2011. The Department reiterated the findings of the Original Adjudicating Authority and previous dismissals by the Bench.

The Tribunal analyzed the case, noting the continuous default in payment of Service Tax by the appellants over the years. The Commissioner found the default to be deliberate, indicating an intent to evade payment of Service Tax. The appellants contested the penalties under Section 76 and Section 78, arguing against the presence of fraud, suppression, or collusion. They highlighted delays in payment due to financial difficulties and previous rulings supporting their stance.

The Tribunal referred to the Karnataka High Court judgment in the case of Motor World, emphasizing the need for reasonable cause for failure to comply with the provisions of Section 76 and Section 78. It differentiated between the applicability of penalties under these sections and held that penalties under Section 78 were not imposable in this case due to the Department's awareness of the appellants' practices and the absence of proposed penalties in subsequent show-cause notices.

Ultimately, the Tribunal partly allowed the appeals by confirming the duty demanded and penalty imposed under Section 76. However, it set aside the penalty imposed under Section 78 of the Finance Act, 1994, based on the analysis of the facts and legal provisions presented during the proceedings.

This comprehensive analysis of the issues involved in the judgment showcases the Tribunal's detailed examination of the arguments presented by both parties and the application of relevant legal principles to reach a reasoned decision.