2019 (9) TMI 1145 - AT - Service Tax

Imposition of penalty u/s 77 and 78 of FA - tax liability not discharged within the due dates specified - failure to file ST-3 returns - suppression of relevant facts - HELD THAT - Even the statute gives a cushion of thirty days time after the Show Cause Notice as sufficient compliance to escape the rigours of Section 78 by pegging the penalty at 15 per cent. It is the case of the appellant that the entire tax (excess, in fact) and interest was paid by 31.03.2011 whereas the Show Cause Notice was issued on 22.02.2011 and the Order-in-Original has appropriated a sum of ₹ 9,00,846/- as against the demand of ₹ 11,36,600/- and clearly, there is no discussion on why the other payments were not considered and nor do we see any justifiable reasons for doing so. There are no doubts with regard to the conduct of the appellant entertained by the Adjudicating Authority except a bald allegation of suppressed the facts which is not sufficient - So also, mere non-filing of ST-3 return is insufficient to bring home the guilt under Section 78 since that default is dealt with separately by a different provision. Penalties set aside - appeal allowed.

Summary

Issues:
Challenge to penalty under Sections 77 and 78 of the Finance Act, 1994.

Analysis:
1. The appellant contested the penalty levied under Sections 77 and 78 of the Finance Act, 1994. The appellant provided Manpower Recruitment or Supply Agency Services exclusively for a specific entity. The Revenue issued a Show Cause Notice demanding payment. The appellant, a proprietorship concern, believed there was no need to file Service Tax returns. A portion of the demanded amount was paid before the Show Cause Notice. There was no dispute regarding the tax demand.

2. The appellant's Advocate argued for the penalty deletion under Section 78 by referring to previous orders, including the appellant's own case and other relevant judgments. The Revenue's Authorized Representative supported the lower authorities' findings, citing specific decisions to justify the penalty.

3. The Tribunal considered both parties' contentions, reviewed the documents, and examined the judgments referred to during arguments. Since there was no challenge to the tax demand, the main issue was whether the penalty under Section 78 was justified.

4. The Tribunal noted that in similar circumstances, the penalty under Section 78 was deleted in the appellant's own case. In contrast, the cases cited by the Revenue involved absolute defaults in tax payments, leading to penalties. The Tribunal emphasized the importance of bona fide belief and deliberate deception in determining penalties.

5. Referring to Section 78 of the Finance Act, 1994, the Tribunal highlighted the conditions for penalty imposition, including fraud, collusion, or wilful misstatement. The Tribunal analyzed the timeline of events and payments made by the appellant in relation to the Show Cause Notice issuance.

6. The Tribunal emphasized that the penalty under Section 78 is not automatic but depends on deliberate deception to evade duty. Citing a Supreme Court case, the Tribunal clarified the necessity of intent to evade duty for penalty imposition.

7. After reviewing the Order-in-Original and finding insufficient evidence to support the penalty, the Tribunal exercised discretion under Section 80 of the Finance Act, 1994, and decided to delete the penalties levied. Consequently, the impugned order was set aside, and the appeal was allowed.