2020 (1) TMI 322 - AT - Service Tax

Imposition of penalties u/s 77 and 78 - Non-payment of service tax - Service Tax Registration not obtained - Dry cleaning services - period 01/04/2012 to 30/06/2012 - HELD THAT - The appellants have not disputed the taxability of the activity undertaken and have also paid the service tax liability as soon as they came to know that their activity is liable to service tax. Further the appellant during the course of investigation have made various payments which is recorded - The Commissioner (Appeals) in the impugned order has recorded the findings that the appellant had paid the entire dues along with 25% penalty of 2, 64, 505/- on 10/10/2018 and the Order-in-Original was dated 27/08/2018. Hence they have not fulfilled the condition as per Section 78 of the Finance Act. In the rectification of mistake application filed by the appellant learned Commissioner vide his Order dated 05/09/2019 has allowed the ROM and modified the impugned order dated 25/03/2019 to the extent of acceptance of payment of reduced penalty as per proviso to Section 78(1) of the Finance Act 1994. Other demands of service tax interest and other aspects stand undisturbed and the appellant has also paid the same as reflected in the table - Further this ROM was allowed by the Commissioner after the present appeal has been filed and in the present appeal the appellant has only aggrieved by the demand of balance penalty imposed on them under Section 78(1) of the Finance Act 1994. Since the Commissioner himself has accepted the reduced penalty by allowing the ROM application filed by the appellant hence the relief sought has already been given by the Commissioner (Appeals). Other penalties are upheld. Appeal dismissed - decided against appellant.

Summary

Issues:
Imposition of penalty under Sections 77 and 78 for non-payment of service tax on dry cleaning services.

Detailed Analysis:
1. Facts and Background: The appellant provided dry cleaning services without obtaining Service Tax Registration or paying the tax. A demand of ?12,31,378/- was raised, of which ?4,00,000/- was paid during investigation. The adjudicating authority confirmed a demand of ?10,58,009/- after allowing exemptions. The appellant appealed against the equivalent penalty imposed by the lower authority.

2. Appellant's Arguments: The appellant, a partnership firm, claimed they were unaware of service tax provisions and only learned about their liability during a Department investigation. They paid the entire demand with interest promptly and argued for waiver of penalty under Section 80 of the Finance Act, 1994, citing reasonable cause for non-payment.

3. Legal Provisions and Precedents: The appellant referred to Section 80 of the Finance Act, 1994, which allowed penalty waiver for reasonable cause. They also cited relevant case laws to support their contention that there was no intention to evade payment.

4. Rectification of Mistake Application: Post the Commissioner's order, the appellant sought rectification, stating they had paid 25% of the penalty amount within the stipulated time. The Commissioner accepted this reduced penalty but upheld other aspects of the order.

5. Decision and Ruling: The Tribunal noted that the main issue was the penalty imposition under Sections 77 and 78. It found the appellant liable for service tax on dry cleaning services and acknowledged their prompt payment upon realizing their liability. However, the appellant failed to meet the conditions of Section 78 regarding penalty payment within 30 days of the order. The Commissioner's acceptance of the reduced penalty through rectification application was deemed sufficient relief, and other penalties were upheld. Consequently, the appeal was dismissed.

6. Conclusion: The Tribunal upheld the imposition of penalties under Sections 77 and 78 due to non-compliance with payment conditions. While acknowledging the appellant's prompt payment post-investigation, it deemed the rectification application's acceptance as adequate relief, leading to the dismissal of the appeal.

(Order pronounced in Open Court on 08/01/2020)