2019 (2) TMI 412 - AT - Service Tax

Penalty u/s 70, 77 and 78 of FA - demand of service tax along with interest were paid before issuance of the SCN - no intent to evade - Held that - Apparently, there is no material available on record to show that the appellant had indulged into suppression of facts, with intent to evade payment of service tax. In any event, non-filing of ST-3 return would not amount to suppression of facts, with intent to defraud Government revenue, unless it is corroborated with other evidences of malafide intention - the imposition of penalty under Section 78 of the Act is not justified. The imposition of penalties under Section 70 and 77 of the Act are warranted for delayed filing of ST-3 returns and for non-submission of documents within the stipulated time frame. Appeal allowed in part.

Summary

Issues:
1. Confirmation of demand of service tax along with interest and penalties
2. Imposition of penalties under Sections 70, 77, and 78 of the Finance Act, 1994
3. Justification of penalties based on non-filing of ST-3 returns and delayed submission of documents

Analysis:

Issue 1: The appellant, engaged in providing taxable services, was issued a show cause notice proposing a demand of service tax, interest, and penalties. The Commissioner confirmed the demand of service tax amounting to ?75,33,032 along with interest and imposed penalties under various sections of the Finance Act, 1994. The appellant did not dispute the demand and had paid a part of the tax even before the enquiry proceedings, indicating no intention to evade payment. The appellant's advocate presented a chart detailing the events.

Issue 2: The Revenue, represented by the Assistant Commissioner, supported the findings of the impugned order, emphasizing that incomplete details in filed returns could be seen as withholding information required by law. The department discovered the non-payment of tax during the enquiry, justifying the imposition of penalties. However, the Tribunal found that the appellant had paid a significant amount before the enquiry, cooperated with the department by submitting records, and rectified the deficient amount after self-assessment. There was no evidence of intentional evasion of tax. Consequently, the Tribunal held that penalties under Section 78 of the Act were not justified but upheld penalties under Sections 70 and 77 for delayed filing of ST-3 returns and non-submission of documents within the specified timeframe.

Issue 3: The Tribunal concluded that the non-filing of ST-3 returns did not automatically imply an intent to defraud the government revenue unless supported by additional evidence of malafide intention. Therefore, while penalties under Sections 70 and 77 were deemed appropriate for procedural delays, the penalty under Section 78 was set aside due to lack of evidence indicating fraudulent intent.

In the final judgment, the Tribunal modified the impugned order by setting aside the penalty imposed under Section 78 of the Act, thereby disposing of the appeal in those terms.