2019 (5) TMI 379 - AT - Service Tax

Non-payment of service tax - service tax/cess during September 2010 to January 2011 recovered but not deposited in the Government Account on due dates - suppression of facts - applicability of Section 73(3) of the Finance Act - HELD THAT - Appellant has collected the service tax and has not paid the same into the Government Treasury and which was detected during the audit thereafter the appellant paid the entire service tax of ₹ 21,10,421/- and interest of ₹ 54,911/- and the same was appropriated. The appellant is not entitled to the benefit of Section 73(3) of the Finance Act because he has collected the service tax and has not paid and therefore the suppression on his part is proved. Penalty upheld - appeal dismissed - decided against appellant.

Summary

Issues:
- Imposition of penalty under Section 78 of the Finance Act, 1994 for non-deposit of service tax collected by the appellants.

Analysis:
1. The appeal was against an order imposing a penalty at 50% on a specific amount under Section 78 of the Finance Act, 1994. The appellants were engaged in taxable services related to construction. They collected service tax during a period but did not deposit it in the Government Account on time, leading to a show-cause notice for recovery and appropriation of the due amount along with interest and penalties under Sections 76 and 78 of the Act.

2. The Assistant Commissioner confirmed the demand, imposed penalties, and appropriated the service tax paid by the appellants. The appellant then appealed to the Commissioner, who set aside one penalty and reduced the other to 50% of the amount. The appellant argued that they paid the service tax before the show-cause notice, citing delays due to the collection of information from various sites for tax computation.

3. The learned AR contended that the appellants collected but did not pay the service tax, also filing delayed returns. He argued that penalty under Section 78 was justified due to suppression. The AR relied on various decisions supporting the imposition of penalties for failure to pay collected service tax, emphasizing the need to adhere to tax payment obligations.

4. The tribunal found that the appellants indeed collected but did not remit the service tax, which was discovered during an audit. Despite later paying the due amount, the tribunal held that the appellants were not entitled to the benefit under Section 73(3) of the Finance Act. Citing precedents, including a Karnataka High Court case, the tribunal upheld the penalty under Section 78, dismissing the appeal and affirming the impugned order.

This detailed analysis of the judgment highlights the issues, arguments, and the tribunal's reasoning behind upholding the penalty under Section 78 of the Finance Act, 1994 in the case.