2019 (11) TMI 789 - AT - Service Tax

Imposition of penalty u/s 78 - tax alongwith interest paid before issuance of SCN - Security Agency Service - reduction of penalty - HELD THAT - The second proviso to Section 78 bid provides that where such service tax and the interest payable thereon is paid within thirty days from the date of the communication of the order determining the liability, the amount of penalty liable to be paid by such person under the first proviso to Section 78 shall be 25% of such service tax - From a perusal of the impugned order it is clear that the demand has been reduced by the learned Commissioner to ₹ 12,48,822/- from ₹ 14,38,822/- on the ground that the service tax on the amount of ₹ 3,19,607/- was not received by the Appellant from M/s. Radission Resort and Spa Ltd. till the date of passing of the impugned order. The provision of Service Tax point of Taxation Rules prevailing during the relevant period specifically provides that the service tax was required to be paid on receipt basis and since this amount of ₹ 3,19,607/- was not received by the Appellant, therefore there Appellant was not required to pay the said amount and hence the learned Commissioner was justified in extending the benefit of point of taxation (till June, 2011) proportionately to the extent of ₹ 1,89,241/-. Reduction of penalty - HELD THAT - The learned commissioner reduced the amount of Service Tax demanded by the amount of ₹ 1,89,241/- alongwith reduced penalty by the same amount. So the amount can be said to be re-determined by the learned commissioner and since the appellant has paid the complete reduced amount of service tax with complete interest and 25% of the amount of reduced penalty as determined by the ld. Commissioner, within thirty days from the date of passing of the impugned order, therefore in the peculiar facts of the case the benefit of second proviso to Section 78(1) of the Finance Act, 1994 can be extended to the Appellant - the impugned order modified to the extent of reducing the amount of penalty to 25% while maintaining the impugned order in all other aspects. Appeal allowed in part.

Summary

Issues:
Challenging impugned order reducing service tax amount and penalty, validity of penalty under section 78 ibid, benefit of second proviso to Section 78(1) of the Finance Act, 1994.

Analysis:
The appeal was filed challenging the order passed by the Commissioner of Central Tax reducing the service tax amount and penalty. The appellant, a security service provider, had failed to pay service tax for the years 2009-10 to 2013-14. Despite paying a substantial amount before the show cause notice was issued, a demand was made. The Commissioner reduced the service tax amount and penalty, considering a specific amount not received by the appellant. The appellant contested the 100% penalty, arguing they paid the reduced amount within the stipulated time, invoking the second proviso to Section 78 of the Finance Act, 1994.

The Commissioner justified the reduction based on the non-receipt of a specific amount by the appellant, in line with the Service Tax point of Taxation Rules. The appellant being a Small Service Provider with financial difficulties was not considered a valid reason for non-payment. While malafide intentions were not proven, delay in payment warranted interest and penalty. The Commissioner's re-determination of the amount was accepted, and the appellant's timely payment of the reduced sum led to the consideration of the second proviso to Section 78(1) for penalty reduction.

The Tribunal partially allowed the appeal, rejecting the cross-objection. The penalty was reduced to 25% in line with the second proviso to Section 78(1) of the Finance Act, 1994. The appellant's compliance with the reduced amount within the specified time frame influenced the modification of the impugned order, maintaining other aspects of the decision.

This detailed analysis covers the issues raised in the appeal, focusing on the reduction of service tax and penalty, the validity of penalty under section 78 ibid, and the application of the second proviso to Section 78(1) of the Finance Act, 1994 in the context of the case.