2008 (2) TMI 84 - AT - Service Tax

Service by a commercial training or coaching centre is a taxable service within the meaning of clause (105) (zzc) mere fact that coaching was provided from the house was not sufficient to make the proprietor believe that she was not liable to pay the tax plea that there was reasonable cause for non- payment, not acceptable Section 80 dispenses with the imposition of penalty only when assessee proves that there was a reasonable cause for failure penalty u/s 76 justified

Summary

Issues:
Imposition of penalty under Section 76 of the Finance Act, 1994 for failure to pay service tax; Interpretation of Section 76 regarding mandatory nature of penalty; Applicability of Section 80 for non-imposition of penalty in case of reasonable cause for failure to pay tax.

Analysis:
The appeal challenged the order of the Commissioner imposing a penalty under Section 76 of the Finance Act for failure to pay service tax. Section 76 mandates a penalty not less than one hundred rupees per day for each day of default in paying the tax. The language of the section clearly indicates the mandatory nature of this penalty. The appellant attempted to challenge the adjudication order but failed to appeal against it, thus limiting the scope of challenging the penalty under Section 84.

Regarding the imposition of penalty under Section 76, the appellant argued that since they paid the tax with interest before the show cause notice, no penalty should be imposed. However, the court differentiated Section 76 from Section 78, which deals with penalties for fraud or suppression of facts. The court emphasized that the penalty under Section 76 is mandatory for failure to pay tax on time.

The appellant also invoked Section 80, which allows for non-imposition of penalty if a reasonable cause for failure to pay tax is proven. The court noted that Section 80 overrides Section 76 and others, but the burden of proving a reasonable cause lies with the assessee. In this case, the appellant claimed ignorance of the tax liability due to providing coaching services from a residence. However, the court held that this was not a reasonable cause, as the definition of "commercial training or coaching" clearly included such services.

In conclusion, the court dismissed the appeal as there was no error in imposing the penalty under Section 76. The appellant's failure to pay tax on time without a reasonable cause led to the rejection of their appeal.

This judgment clarifies the mandatory nature of penalties under Section 76 of the Finance Act, the distinction between penalties under different sections, and the requirement of proving a reasonable cause under Section 80 to avoid penalty imposition.