2019 (2) TMI 414 - HC - Service Tax

Imposition of penalty - tax collected but not deposited to the Government - Held that - After recovering the tax, it was the bounden duty of the assessee to have remitted it or deposited it in the Central Government Treasury - If the answer to that is that the assessee is in financial difficulty and such a reason or ground can never be a justification for not remitting or depositing the collected tax in Government Treasury, then, the reasons in paragraph 6 to sustain the penalty is neither perverse nor vitiated by any error of law apparent on the face of the record. Consequently, none of the questions proposed are substantial questions of law. Demand upheld - Appeal dismissed - decided against appellant.

Summary

Issues:
1. Whether the services rendered by the appellant-assessee are taxable?
2. Whether the service provided falls under business auxiliary services?
3. Whether the service provided is exempt under an Exemption Notification?
4. Whether financial difficulty justifies non-remittance of tax to the Government Treasury?
5. Whether the penalty imposed is justified?

Analysis:

1. The appellant contended that the services rendered were not taxable, and the Tribunal failed to consider this aspect. The Tribunal noted that the appellant is registered as a provider of business auxiliary services and was paying service tax until a certain period. However, the appellant stopped discharging the liability, leading to recovery proceedings. The Tribunal found the appellant's argument of services not being taxable as an afterthought, as the appellant had applied for registration as a provider of business auxiliary services and continued to bill customers with the service tax component.

2. The Tribunal determined that the appellant's argument of the service being exempt under an Exemption Notification was not valid. The appellant did not raise any issue of classification and continued to include the service tax component in bills to customers. The failure to remit or deposit the collected tax in full led to recovery proceedings, indicating that the service provided did not fall under an exemption.

3. The Tribunal addressed the issue of financial difficulty raised by the appellant as a defense for not remitting the tax. It held that financial difficulty cannot justify non-remittance of tax to the Government Treasury. The Tribunal found that the reasons provided to sustain the penalty were not erroneous, concluding that financial difficulty does not excuse non-compliance with tax remittance obligations.

4. The Tribunal dismissed the appeal, stating that none of the proposed questions were substantial questions of law. It found the appeal devoid of merits and upheld the decision of the Adjudicating Authority. The Tribunal did not order any costs, indicating that the appeal was unsuccessful and the penalty imposed was justified based on the non-compliance with tax remittance obligations.

In conclusion, the judgment of the Bombay High Court upheld the decision of the Tribunal, emphasizing the importance of complying with tax obligations and dismissing the appeal due to lack of merit.