2009 (6) TMI 412 - AT - Service Tax

Penalty imposed under Sections 76 and 78 - appellant were not discharging the service tax liability under security agency service as their turn over was less than the prescribed limit. - As regards penalty imposed under Section 78, I find that the appellant had no intention to evade payment of service tax. it is undisputed fact that the appellant has discharged the service tax liability along with interest before the issue of show cause notice. In the absence of any evidence in support of the claim of suppression of facts with intent to evade payment of service tax, I am of the considered view that the penalty under Section 78 is not sustainable - As regards the penalty imposed under Section 76, we find that service tax collected from customers and appellant aware of liability, Section 73(3) on waiver of SCN not applicable - penalty is imposable under Section 76 - However I reduce the penalty imposed @ 200 per day to to Rs. 100/- per day during period of failure to make payment

Summary

Issues:
1. Liability for service tax on 'Cleaning Services'
2. Imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994

Issue 1: Liability for service tax on 'Cleaning Services'
The appellant, registered for 'Security Agency Service,' also provided taxable 'Cleaning Services.' The lower authorities discovered non-payment of service tax on the 'cleaning service' from 15-6-2005 to 31-12-2005. The appellant later paid the entire service tax liability and interest. A show cause notice was issued proposing demand of service tax, Education Cess, penalties under Sections 76, 77, 78, and interest. The adjudicating authority upheld the demand, penalties, and interest. The appellant contended that the delay was due to the illness of the proprietrix and had no intention to evade tax.

Issue 2: Imposition of penalties under Sections 76, 77, and 78
The appellant challenged the penalties imposed under Sections 76 and 78 but accepted the penalty under Section 77. The appellant argued that there was no intent to evade payment and cited the delayed payment due to illness. The appellant collected service tax from customers, indicating awareness of tax liability. The Tribunal found no evidence of intent to evade tax and set aside the penalty under Section 78. Regarding the penalty under Section 76, the Tribunal noted that the appellant was aware of the tax liability but found the original penalty excessive. The penalty was reduced from Rs. 200/- to Rs. 100/- per day for the period of default. The appellant's argument invoking Section 73(3) was rejected as inapplicable to the case.

In conclusion, the Tribunal modified the impugned order by setting aside the penalty under Section 78 and reducing the penalty under Section 76. The appeal was disposed of accordingly.