2020 (5) TMI 96 - AT - Service Tax

Imposition of penalty u/s 78 - short paid service tax alongwith interest paid on being pointed out - malafide intent or not - HELD THAT - The substantial amount of service tax was paid on being so pointed out by the audit along with interest. Further, it is recorded in the impugned order that the balance short fall of ₹ 52,429/- was also paid by challan dated 28 February, 2013. That is on before the date of passing of the order in original. Accordingly, under the facts and circumstances, no case of deliberate default is made out against the appellant - The appellant have given a cogent explanation for the tax short paid, that they were not having competent staff and as such some errors occurred, it was not deliberate. Such explanation have not found to be untrue. Penalty u/s 78 is set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Penalty under Section 78 imposed by the Commissioner (Appeals) for alleged service tax short payment.
2. Applicability of penalty under Section 78 based on the circumstances of the case.

Analysis:
1. The appellant, engaged in cargo handling and manpower supply service, was audited for the period March 2007 to June 2010. It was discovered that the appellant had not issued serially numbered invoices, had missing invoices in their records, and did not maintain day-to-day books of account accurately. Upon scrutiny, it was found that there was a shortfall in service tax payment amounting to ?11,76,241. The appellant acknowledged the discrepancy and paid the due amount along with interest. The show cause notice proposed a demand of ?12,86,888, with a suggestion to appropriate the excess payment made. The original order confirmed the demand but did not impose a penalty. The Revenue appealed, leading to the Commissioner (Appeals) imposing a penalty under Section 78, emphasizing the appellant's obligation to maintain proper records and pay the service tax only after audit scrutiny.

2. The Tribunal, upon hearing the arguments and examining the records, noted that a significant portion of the service tax was paid promptly upon audit detection, with the remaining shortfall also being paid before the original order date. The Tribunal found no evidence of deliberate default by the appellant, considering the explanation provided that errors occurred due to lack of competent staff rather than intentional evasion. The Tribunal accepted the appellant's explanation as credible, leading to the setting aside of the penalty under Section 78. The decision highlighted that the circumstances did not support a case of deliberate non-compliance, as the appellant had rectified the shortfall upon identification and provided a plausible explanation for the errors.

This detailed analysis of the judgment highlights the issues of penalty imposition under Section 78 and the Tribunal's decision based on the specific facts and explanations presented during the proceedings.