2009 (3) TMI 296 - AT - Service Tax

Penalty default in payment of tax - The undisputed facts are that appellant is liable to discharge the Service Tax on the service of Manpower Recruitment Services & Commercial Training and Coaching Services . It is also undisputed that they had collected the Service Tax for the period January 2006 to 17-4-2006 and did not deposit the amount, in time, as provided in the law. It is also not disputed that appellant has discharged the entire Service Tax liability with interest. Appellant is not challenging the tax liability and interest thereon. The challenge of the appellant in this appeal is against the imposition of penalties under Section 76, 77 and 78 of the Finance Act, 1994. since appellant had collected the Service Tax but not deposited the same with the Government treasury, imposition of penalty u/s 76, as it stood during the relevant period, is correct and justified - as appellant has not filed the ST-3 Returns as mandated penalty imposed under Section 77 is correct and is upheld - we find that there is no allegation in the show cause notice, regarding suppression, willful misstatement, fraud or collusion with intent to evade payment of Service Tax, no penalty can be imposed u/s 78 demand confirmed u/s 73(1) appeal partly allowed

Summary

Issues:
- Appellant's liability to discharge Service Tax on Manpower Recruitment Services & Commercial Training and Coaching Services
- Imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994

Analysis:

Issue 1: Appellant's liability to discharge Service Tax
The appellant, a service provider under taxable categories, collected Service Tax but failed to deposit it to the Government account. The appellant admitted non-payment due to financial problems but assured to clear the liability. The Adjudicating Authority issued a show cause notice demanding Service Tax amounts and penalties. The Authority confirmed the Service Tax liabilities and imposed penalties, considering the appellant's non-compliance. The appellant challenged the penalties, arguing they had already paid the liabilities and citing financial hardship. The Revenue contended that the appellant, aware of the law, should have complied. The Tribunal found the appellant liable for Service Tax but disputed the penalties.

Issue 2: Imposition of penalties under Sections 76, 77, and 78
The Adjudicating Authority imposed penalties under Sections 76, 77, and 78 of the Finance Act, 1994. The Tribunal upheld the penalty under Section 76, as the appellant collected but did not deposit Service Tax, justifying the penalty for non-compliance. The penalty under Section 77 for not filing ST-3 Returns was also upheld. However, regarding the penalty under Section 78, the Tribunal found no allegations of fraud, collusion, or suppression in the show cause notice. Referring to relevant case laws, the Tribunal concluded that Section 78 penalties require specific intent to evade payment, which was absent in this case. Therefore, the Tribunal set aside the penalty under Section 78. The appeal was disposed of accordingly.

This judgment highlights the importance of compliance with Service Tax regulations and the specific requirements for imposing penalties under different sections of the Finance Act, 1994. The Tribunal's detailed analysis of the appellant's liabilities and the justification for penalties provides clarity on legal obligations and consequences for non-compliance in tax matters.