2019 (12) TMI 857 - HC - Service Tax

Penalty - Assessee has admittedly paid the service tax with interest but the delay in payment of the said service tax occurred on account of financial crisis of the respondent Assessee - HELD THAT - The fact that the Assessee paid the service tax along with the interest in question soon upon getting information from the Department as noted by the Tribunal setting aside of the penalty on the ground of delay in depositing the penalty was justified and therefore the learned Tribunal has not erred in setting aside such penalty imposed upon the Assessee. Appeal dismissed - decided against Revenue.

Summary

Issues:
Penalties under Section 76 and 78 of the Finance Act, 1994 set aside by the Tribunal based on financial crisis as a reasonable cause for delay in payment of service tax.

Analysis:
The High Court of Madras addressed the appeals filed by the Revenue against the order of the Tribunal setting aside penalties under Section 76 and 78 of the Finance Act, 1994. The Tribunal based its decision on the appellant's financial crisis as the reason for the delay in payment of service tax. The appellant argued that the delay was due to severe financial crisis, and they prioritized day-to-day expenses to sustain the business. The company had faced financial hardship, leading to the accumulation of service tax liability. The Tribunal noted that there was no evidence of a positive act of suppression to evade payment of service tax. The appellant had paid the service tax along with interest upon receiving funds from the Income Tax Department. The High Court agreed with the Tribunal's decision, stating that setting aside the penalty due to the delay in payment was justified, considering the circumstances. The Court found no legal question for the Revenue in the appeals, concluding that they lacked merit and dismissing them without costs.

In conclusion, the High Court upheld the Tribunal's decision to set aside the penalties under Sections 76 and 78 of the Finance Act, 1994, based on the appellant's financial crisis as a reasonable cause for the delay in payment of service tax. The Court found no legal grounds to support the Revenue's appeals, leading to the dismissal of the appeals.