2022 (2) TMI 8 - AT - Service Tax

Levy of Interest on delayed payment of service tax - reasonable cause for such failure present or not - HELD THAT - The demand of interest under Section 75 of Finance Act, 1994 is mandatory and the assessee has no escape from this liability. Neither does this Tribunal have the power to waive the demand under Section 75 of the Finance Act, 1994 - there are no force in the submissions in the assessee s appeal seeking waiver of the interest on the service tax amount payable by them either on account of renting of immovable property service rendered by them or on account of service tax collected by them on the loan application fees which was not deposited. The assessee s appeals, therefore, deserve to be dismissed. Restoration of penalty imposed u/s 76, 77 and 78 of FA - assessee is a large non-banking finance corporation formed by the Government of Rajasthan - HELD THAT - Merely because an organization is formed by the Government it does not get any special treatment with respect to the provisions of service tax. It is as liable to pay service tax as any other assessee. For failures, it is as liable to penalties as any other assessee. No more, no less. This takes us that the next question as to whether the assessee, in the factual matrix of this case can be said to have proved that it had reasonable cause for failure to pay service tax - On being pointed out, the assessee immediately paid the service tax along with interest. The assessee was also renting out some of its properties for commercial use and collected rent of about ₹ 13 lakhs. This activity was liable to service tax but the assessee had not paid service tax. On being pointed out, the assessee has immediately paid the service tax along with interest. Given this factual matrix, we are inclined to conclude that these were mere careless mistakes by the assessee without any intention to evade service tax. They fall within the scope of reasonable cause for failure the cause being ignorance or lack of due care. Therefore, the case falls within the mischief of Section 80 of the Finance Act, 1994. It has been rightly invoked by the Commissioner (Appeals) and the penalties have been waived by him correctly. Appeal dismissed.

Summary

Issues:
1. Confirmation of demand of service tax against the assessee on 'renting of immovable property' service.
2. Waiver of penalties under Section 76, 77, and 78 of the Finance Act, 1994.
3. Assailing the confirmation of demand of service tax and interest by the learned Commissioner (Appeals).
4. Demand of interest under Section 75 of the Finance Act, 1994.

Issue 1:
The judgment involved cross appeals filed by the assessee and the Revenue against the same order-in-appeal. The learned Commissioner (Appeals) confirmed the demand of service tax against the assessee on 'renting of immovable property' service but modified the demand by removing the duplicated amount. The penalties under Section 76, 77, and 78 were set aside based on the assessee's cooperation, bonafide belief, and the precedent of waiving penalties in similar cases. The Tribunal upheld the confirmation of demand of service tax against the assessee on the mentioned service.

Issue 2:
The Revenue appealed against the setting aside of penalties under Section 76, 77, and 78 by the Commissioner (Appeals) based on invoking Section 80 of the Finance Act, 1994. The Revenue argued that the bonafide belief of the assessee was not a sufficient ground to invoke Section 80, and the penalties should not have been waived. However, the Tribunal agreed with the Commissioner (Appeals) that the assessee had a reasonable cause for the failure to pay service tax, considering the organization's nature, registration, and immediate payment of service tax upon detection. Therefore, the Tribunal dismissed the Revenue's appeal.

Issue 3:
The assessee challenged the confirmation of demand of service tax and interest by the Commissioner (Appeals). The Tribunal noted that the demand of interest under Section 75 of the Finance Act, 1994 is mandatory, and the assessee had no escape from this liability. The Tribunal upheld the demand of interest, stating that it cannot be waived.

Issue 4:
The Tribunal emphasized that the assessee, being a Government undertaking, was not immune to paying service tax or penalties. However, considering the factual matrix of the case, including immediate payment of service tax upon detection of errors, the Tribunal agreed with the Commissioner (Appeals) that the penalties were rightly waived under Section 80 of the Finance Act, 1994. The Tribunal upheld the impugned order and dismissed both appeals.

This comprehensive analysis of the judgment highlights the key issues, arguments presented by both parties, and the Tribunal's reasoning and decision on each issue.