2019 (2) TMI 576 - AT - Service Tax

Imposition of penalty - Non-payment of service tax - non-filing of returns - Manpower Recruitment and Supply services - period January, 2009 to March, 2012 - tax with interest paid on being pointed out - Held that - The plea of sickness of the proprietor of the appellant cannot be a ground for not discharging Service Tax though collected from the customers. It is not in dispute that they continued to run the business and received the amount during the said period including the Service Tax component - Also, the appellant had not intimated in any manner to the Department about collection of the Service Tax from the customers and not depositing with the Govt. by way of filing periodical returns. Since there is contravention of the provisions with intent to not discharge Service Tax, the provisions of Section 73(3) of the Finance Act, 1994 cannot be invoked - Penalty upheld - appeal dismissed - decided against appellant.

Summary

Issues:
- Failure to discharge Service Tax liability and file periodical Service Tax returns
- Applicability of Section 73(3) of the Finance Act, 1994
- Imposition of penalty under section 78 and other provisions of the Finance Act, 1994

Analysis:

Issue 1: Failure to discharge Service Tax liability and file periodical Service Tax returns
The appellant, engaged in providing Manpower Recruitment and Supply services, failed to discharge their Service Tax liability and did not file periodical Service Tax returns between January 2009 and March 2012. Despite collecting the Service Tax from customers, they did not pay it to the government. The Commissioner confirmed the demand with interest and penalty. The appellant argued that they paid the outstanding Service Tax before the show-cause notice was issued, citing Section 73(3) of the Finance Act, 1994. However, the Revenue contended that the appellant's actions of not paying the Service Tax despite collecting it absolved them from the benefit of Section 73(3). The Tribunal noted that the appellant did not inform the Department about collecting Service Tax but not depositing it, and upheld the penalty under section 78 and other provisions of the Finance Act, 1994.

Issue 2: Applicability of Section 73(3) of the Finance Act, 1994
The appellant claimed that since they paid the outstanding Service Tax before the show-cause notice, they should be covered under Section 73(3) of the Finance Act, 1994. However, the Revenue argued that this provision did not apply as the appellant had collected the Service Tax but failed to remit it to the government. The Tribunal agreed with the Revenue, stating that the provisions of Section 73(3) could not be invoked due to the appellant's intentional failure to discharge the Service Tax liability.

Issue 3: Imposition of penalty under section 78 and other provisions of the Finance Act, 1994
The Tribunal found that the appellant, despite collecting the Service Tax from customers, did not pay it to the government and did not inform the Department about this discrepancy. Therefore, the Tribunal upheld the penalty imposed under section 78 and other provisions of the Finance Act, 1994. The appellant's plea of the proprietor's sickness as a reason for not discharging the Service Tax was rejected, emphasizing that such reasons could not justify non-compliance with tax obligations.

In conclusion, the Tribunal upheld the impugned order, dismissing the appeal and emphasizing the importance of complying with tax obligations and not collecting taxes from customers without remitting them to the government.