2001 (9) TMI 1 - AT - Service Tax

Service Tax Delay in receiving registration on account of uncertainty about levy and collection of taxes (2) Penalty

Summary

Issues:
Late submission of service tax return in Form ST-3, imposition of penalty under Sections 76 and 77 of the Finance Act, 1994, confusion about levy of service tax, discretion in penalty imposition, reasonable cause for delay in submission of returns.

Late Submission of Service Tax Return:
The appellant was penalized for late submission of the service tax return in Form ST-3. The case involved confusion regarding the levy of service tax on security agencies. The appellant argued that they were unaware of the imposition of service tax until March 2000 and promptly paid the tax and interest upon becoming aware. The Commissioner (Appeals) upheld the penalty, noting that the appellant had already paid the interest and service tax. The Tribunal acknowledged the confusion but emphasized that service tax on security services was chargeable from 16-10-98.

Imposition of Penalty:
The Tribunal considered the provision under the Service Tax Rules, which required quarterly returns to be filed with a penalty for late submission. Citing precedent, the Tribunal noted that penalty imposition was discretionary. Referring to a previous case, it was highlighted that confusion among assessees could be considered a reasonable cause for late filing. The Tribunal reduced the penalty from Rs. 1,05,185 to Rs. 10,000, taking into account the confusion surrounding the levy of service tax on certain services and the provision that no penalty should be imposed if a reasonable cause is proven.

Confusion About Levy of Service Tax:
There was confusion surrounding the levy of service tax on security services, with the appellant claiming they were unaware of the tax until March 2000. The appellant argued that the confusion led to a delay in registration and submission of returns. The Tribunal acknowledged the confusion but clarified that the tax on security services was indeed chargeable from 16-10-98. Despite the confusion, the Tribunal found that there was no dispute regarding the chargeability of service tax on security services from the specified date.

Discretion in Penalty Imposition:
The Tribunal recognized that penalty imposition was discretionary, as established in previous cases. It was noted that confusion among assessees could be considered a reasonable cause for late filing, leading to a reduction in the penalty amount from the initial imposition of Rs. 1,05,185 to Rs. 10,000. The Tribunal considered the facts and circumstances of the case, along with relevant case law, in determining the appropriate penalty amount based on the confusion surrounding the levy of service tax on certain services.

Reasonable Cause for Delay in Submission of Returns:
The appellant argued that the confusion surrounding the levy of service tax on security services was a reasonable cause for the delay in registration and submission of returns. The Tribunal agreed that confusion existed but emphasized that the chargeability of service tax from the specified date was not in dispute. Despite the confusion, the Tribunal considered the appellant's argument and reduced the penalty amount based on the reasonable cause presented for the delay in submission of returns.