2009 (7) TMI 451 - AT - Service Tax

Imposition of interest and penalty for delay in payment of service tax - The original authority found the respondents guilty of suppression of fact with intent to evade payment of duty on the sole ground that they had not registered with the department and had not paid the service tax due in time. There is no finding of suppression of fact, willful misstatement, fraud etc. with intent to evade payment of tax by the respondents substantiated with any evidentiary material in the orders of the lower authorities. In the absence of any reliable finding of intention to evade payment of duty by the respondents in each of the orders, failure to pay tax due on time has to be held to have occasioned by the ignorance of the statutory requirements on the part of the respondents. In the circum stances, I hold that sufficient cause existed in these cases which prevented the respondents from discharging the tax liability in time and that they are entitled to the relief of waiver of penalty under Section 80 of the Act. However, the respondents are liable to pay interest for the delay in payment of service tax

Summary

Issues:
1. Demand of interest and penalties imposed on the respondents for non-payment of service tax.
2. Applicability of Section 80 of the Finance Act, 1994 for waiver of penalty.
3. Liability of the respondents to pay interest for delayed payment of service tax.

Analysis:

Issue 1: Demand of interest and penalties
The respondents provided taxable services without fulfilling statutory formalities, leading to the initiation of proceedings by the department. The original authority demanded service tax, interest, and penalties under various sections of the Finance Act, 1994. However, the Commissioner vacated the demand of interest and penalties. The appeals aimed to reinstate these demands based on the argument that non-registration with the department constituted suppression of fact to evade tax, warranting interest and penalties. The Tribunal found no evidence of willful misstatement or fraud by the respondents to evade tax. It concluded that the failure to pay tax on time was due to ignorance of statutory requirements, justifying the waiver of penalties under Section 80 of the Act. The order of the lower appellate authority was upheld in this regard.

Issue 2: Applicability of Section 80 for waiver of penalty
The appellant contended that payment of duty liability with interest before the show cause notice did not absolve the respondents of liability to interest and penalty. However, the Tribunal noted that the absence of intention to evade payment of duty was not supported by evidentiary material. It held that the respondents had a sufficient cause for the delay in discharging tax liability, entitling them to the relief of penalty waiver under Section 80 of the Act.

Issue 3: Liability to pay interest for delayed payment
The Tribunal examined Section 75 of the Act, which mandates interest payment for delayed service tax payment. It found the respondents liable for interest due to the delay in payment. The impugned orders were deemed inconsistent with legal provisions as they vacated the demand for interest. The Tribunal overturned this aspect of the orders, reinstating the demand for interest from the respondents. The appeals were partially allowed in this regard.

In conclusion, the Tribunal upheld the waiver of penalties under Section 80 of the Act due to the respondents' ignorance of statutory requirements, while reinstating the demand for interest for delayed payment of service tax.