2023 (2) TMI 480 - AT - Service Tax

Levy of penalty under Section 76,77 78 of FA - demand of service tax was confirmed under Section 73(A) of the Finance Act, 1994 where the respondent has collected service tax from their customer and not deposited to the government - HELD THAT - From the reading of sections 76 78, it is clear that penalty under such sections can be imposed only when demand of service tax is confirmed under Section 73(1) of the Finance Act, 1994 - In the present case, the service tax demand was confirmed under Section 73(A) therefore, in case of confirmation of demand under Section 73(A) there is no application of Section 76 and 78 for imposition of penalty. Therefore, the adjudicating authority has rightly not imposed the penalty under Section 76 78. However, the respondent has not followed the provision such as non-obtaining the service tax registration nor deposited the service tax collected from their customer on their own therefore, in terms of Section 77 they are liable to pay penalty of Rs.10,000/-. Thus, penalty of Rs.10,000/- is imposed on the respondent - appeal of Revenue allowed partly.

Summary

Issues Involved:
Whether the respondent is liable to penalty under Section 76, 77 & 78 of the Finance Act, 1994 for not depositing service tax collected from customers to the government.

Analysis:
The issue in this case revolves around the imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994 on the respondent for failing to deposit service tax collected from their customers to the government. The Deputy Commissioner representing the revenue argues that since the respondent did not pay the service tax, they are indeed liable for penalties under the mentioned sections. On the other hand, the respondent's Counsel contends that penalties under Sections 76 & 78 can only be imposed if the service tax is payable by the respondent and not paid, as per Section 73(A). In this specific case, the service tax was not originally payable, but was collected from clients and later recovered by the adjudicating authority under Section 73(A). The Counsel cites a previous tribunal decision to support their argument.

Upon careful consideration of both sides' submissions and a review of the records, the tribunal notes that the adjudicating authority did not impose penalties under Sections 76, 77 & 78 despite confirming the service tax demand under Section 73(A). Referring to the provisions of Sections 76 & 78, the tribunal concludes that penalties under these sections can only be applied when the service tax demand is confirmed under Section 73(1) of the Finance Act, 1994. Since the demand in this case was confirmed under Section 73(A), the tribunal finds that Sections 76 and 78 do not apply for penalty imposition. However, the tribunal observes that the respondent did not comply with certain provisions, such as not obtaining service tax registration and failing to deposit the collected service tax, leading to the imposition of a penalty of Rs.10,000 under Section 77.

Consequently, the tribunal imposes a penalty of Rs.10,000 on the respondent, partially allowing the revenue's appeal. The judgment clarifies the nuanced application of penalty provisions under different sections of the Finance Act, 1994 based on the nature of the service tax demand confirmation, ultimately emphasizing compliance with statutory requirements to avoid penalties.