2019 (5) TMI 73 - AT - Service Tax

Imposition of penalty u/s 78 - payment of tax along with interest on being pointed out - HELD THAT - The default was only for a short period and the default of delay in filing of the Returns remains accepted. The appellant has also paid penalty and that no appeal is filed before this Court. Further, they have paid the tax on being pointed out and thus, the same is a good cause for the belated payments. Thus, in view of the above facts, there can be no dispute with regard the bonafides of the appellant. It is a fit case where discretion of Section 80 could be exercised to the extent of deleting the penalty under Section 78 and the impugned order is accordingly set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
Penalty under Section 78 of the Finance Act for non-payment of Service Tax for the period March 2011 & June 2011.

Analysis:

Issue 1: Penalty under Section 78
The case revolved around the penalty levied under Section 78 of the Finance Act due to non-payment of Service Tax for the period March 2011 & June 2011. The appellants, rendering services under 'Security Agency Services,' had not paid the tax for the mentioned period but immediately paid the tax and interest upon discovery during an audit. Subsequently, a Show Cause Notice (SCN) was issued proposing demand and appropriation of the tax and interest. The Order-in-Original confirmed the demands, leading to an appeal before the Commissioner of Central Excise (Appeals-II), Bangalore. The appellate authority upheld the demands, prompting the present appeal.

Issue 2: Arguments and Considerations
The appellant argued that the delay in payment was due to a change in office location, resulting in new staff lacking knowledge of Service Tax matters. The tax and interest were paid before the SCN was issued, and the delay was only for a short period. The appellant had also paid the penalty, and no appeal was filed before the Court. The appellant's actions of immediate payment upon detection and lack of dispute regarding the belated payments were considered. The appellant's bonafides were acknowledged, citing relevant decisions of the jurisdictional High Court of Karnataka.

Issue 3: Decision and Rationale
After considering the arguments and facts, the Tribunal found that the appellant's case warranted the exercise of discretion under Section 80. Citing precedents from the High Court of Karnataka, the Tribunal concluded that the penalty under Section 78 should be deleted. The Tribunal emphasized the immediate payment upon detection, lack of dispute, and the appellant's bonafides as key factors leading to the decision. Consequently, the appeal was allowed, and the penalty under Section 78 was ordered to be deleted.

In conclusion, the Tribunal set aside the impugned order, highlighting the importance of immediate payment upon detection, lack of dispute, and the appellant's bonafides in deciding to delete the penalty under Section 78.