2019 (10) TMI 172 - HC - Service Tax

Imposition of penalty - Appellant did not file the ST-3 returns nor paid service tax within the stipulated time under the Act - HELD THAT - The SCN was issued to the Appellant consequent to investigation done by the department and on failure of the Appellant to respond to the various letters addressed by the department directing the Appellant to pay the dues along with interest. It was only consequent to investigation and summoning the proprietor that not only was the service tax for the period involved in the present show cause notice paid along with interest but also service tax which was not paid for the earlier period was paid by the Appellant on his own. In this case the Appellant does not dispute the demand of service tax even after payment of tax before the issue of show cause notice as it is found that there is suppression of fact on the part of the Appellant. The penalty which has been imposed under Section 78 of the Act is only a consequence of the demand being confirmed on account of suppression of facts. Therefore, in the above facts there is no merit in this submission and would not give rise to any substantial question of law. The notice which was issued to the Appellant was on invoking the extended period of limitation and that has not been a subject of challenge before the Tribunal or before us - The Appellant does not dispute that so far as demand is concerned the extended period of limitation is applicable. The view taken by the authorities under the Act has found that the conduct of the Appellant is soiled with suppression of facts. This finding of fact is a possible view. Nothing has been shown to us which indicate non consideration of the above submission. Thus the imposition of penalty under section 78 of the Act cannot be faulted. The question of invoking of Section 80 of the Act in such cases would not arise because Section 78 of the Act itself supposes lack of bona-fides on the part of the assessee and this view has not been shown to be perverse. In these circumstances, the question as proposed does not give rise to any substantial question of law. Thus, not entertained. Appeal dismissed - decided against appellant.

Summary

Issues:
Challenge to imposition of penalty and dismissal of appeal.

Analysis:
1. The appellant, engaged in providing "Rent-a-Cab Service," did not file ST-3 returns or pay service tax within the stipulated time under the Act for the period 2010-2011 to 2012-2013. Despite various letters from the Revenue, the appellant failed to respond, leading to an investigation where it was found that the appellant was in default regularly, resulting in frozen accounts. Subsequently, the appellant paid service tax, interest, and penalty. A show cause notice was issued invoking the extended limitation period, confirming service tax demand and imposing a penalty under Section 78 of the Act.

2. The Commissioner (Appeals) confirmed the service tax demand but reduced the penalty under Section 78. The appellant then appealed to the Tribunal, which found that the appellant had not complied with statutory provisions, collected service tax but did not deposit it, and failed to prove bona fides regarding non-payment. The Tribunal upheld the Commissioner's decision.

3. The appellant challenged the Tribunal's order, arguing that as service tax was paid before the show cause notice, no penalty should be imposed. The appellant also claimed the Tribunal's order was non-speaking, failing to consider a precedent where a similar penalty was set aside.

4. The High Court noted that the show cause notice was issued after investigation and failure to respond to payment requests. The appellant did not dispute the extended limitation period for demand but contested the penalty under Section 78, claiming no penalty should apply as service tax and interest were paid before the notice. The Court highlighted Section 73(4) of the Act, excluding Section 73(3) in cases of suppression, which applied here due to the appellant's failure to disclose facts.

5. The Court addressed the non-speaking order claim, examining the precedent cited by the appellant. It found that the conduct of the appellant did not warrant invoking Section 80 of the Act for penalty waiver, as the authorities under the Act deemed the appellant's conduct not bona fide. The Court dismissed the appeal, upholding the penalty under Section 78 due to the suppression of facts by the appellant, concluding that no substantial question of law arose.