2019 (6) TMI 1071 - AT - Service Tax

Short payment of service tax - dredging services - period 2009 -10 - non-payment of service tax for the period 2009 -10 and also non-filing of returns due to financial problem - Extended period of limitation - penalty - HELD THAT - The fact remains that the Appellant had recorded all the transactions in books of accounts and produced the same before the audit officers during audit. However, the appellant failed to file necessary periodical ST-3 returns to the department, therefore, the fact regarding non payment of service tax was not brought to the notice of department. Therefore, extended period is rightly invoked by the lower authority; accordingly, the demand majority of which amount paid by the appellant is sustainable. Penalty u/s 76 and 78 of FA - HELD THAT - The penalty under Section 76 78 both cannot be imposed simultaneously in the view of Honb le Gujarat High Court judgement in case of Raval Trading Co., Vs. CST 2016 (2) TMI 172 - GUJARAT HIGH COURT , accordingly, penalty imposed under Section 76 is set aside - As regard penalty imposed under Section 78, as per the appellant s submission, the non payment of service tax is due to financial difficulties. It is also observed that the appellant have recorded the transaction in their books of account and from which only audit could point out the non payment of service tax. With these facts, the appellant has made out a strong case for waiver of penalty under Section 78 invoking Section 80 of the Finance Act, 1994. The appellant have made out a case for waiver of penalty imposed under Section 78 invoking Section 80 of the Finance Act, 1994. Therefore, despite the extended period of demand is invoked, the penalty imposed under Section 78 is though sustainable otherwise, but in the facts and circumstances of the case, there is reason to invoke section 80 - penalty set aside. Scope of SCN - demand of ₹ 7,07,616/- - HELD THAT - The demand of ₹ 7,07,616/- has been confirmed which was not even proposed in show cause notice which is not sustainable being beyond the scope of show cause notice - demand not sustainable. Appeal allowed in part.

Summary

Issues:
1. Short payment of service tax for the years 2008-09 and 2009-10.
2. Invocation of extended period of limitation for demand and penalty.
3. Imposition of penalty under Sections 76 and 78.
4. Applicability of Section 80 of the Finance Act, 1994 for waiver of penalty.
5. Confirmation of demand not proposed in the show cause notice.

Short Payment of Service Tax:
The case involved M/s Sanghi Infrastructure Ltd. facing a service tax demand for short payment during 2008-09 and non-payment for 2009-10. The appellant had paid a significant amount but failed to deposit the full service tax due to financial difficulties arising from dredger maintenance costs. The appellant's failure to file necessary returns led to the non-payment going unnoticed until detected during an audit.

Extended Period of Limitation:
The Revenue argued that the extended period was justified due to the appellant's failure to self-assess and pay the service tax, which would have remained undetected without the audit. The Tribunal upheld the extended period invocation, considering the appellant's failure to bring the non-payment to the department's notice.

Imposition of Penalty under Sections 76 and 78:
The appellant contended that penalties under both sections should not apply simultaneously. Citing a Gujarat High Court judgment, the Tribunal set aside the penalty under Section 76 but found a strong case for waiving the penalty under Section 78 due to the appellant's financial difficulties and the timely payment post-audit.

Applicability of Section 80 for Penalty Waiver:
The Tribunal analyzed Section 80 of the Finance Act, 1994, which allows for penalty waiver if a reasonable cause for failure is proven. Distinguishing judgments on mandatory penalties under other acts, the Tribunal found the appellant eligible for penalty waiver under Section 80 due to financial constraints and the voluntary payment post-audit.

Confirmation of Demand not Proposed in Show Cause Notice:
The Tribunal held that confirming a demand not proposed in the show cause notice was beyond its scope and set aside the demand of ?7,07,616. The impugned order was modified accordingly, partly allowing the appeal.

In conclusion, the Tribunal upheld the demand for short payment of service tax, justified the invocation of the extended period, waived the penalty under Section 78, and set aside the penalty under Section 76 and the demand not proposed in the show cause notice. The judgment emphasized the importance of timely self-assessment and payment of service tax obligations, while also considering reasonable causes for failures in compliance.