2010 (1) TMI 129 - AT - Service Tax

Penalty for late payment of service tax - GTA service - officers visited the premises of respondents on 3.4.07 and noticed that the respondents have been availing the services of goods transport agency for receipt of their inputs and despatch of final products and in respect of freight paid by them, they have not discharged service tax liability. Service tax involved amounting to Rs.50,328/-, Rs.13829/- and Rs.1,226/-, in respect of unit I, Unit II and Engineering Division respectively have been paid along with interest before issue of show cause notice. Show cause notice was issued on 24.4.08 and original authority in addition to confirming the demand of service tax and interest already paid, imposed equal amounts as penalties under Section 76 and also equal amounts as penalties under Section 78 on each of the above units. In addition, he has also imposed a penalty of Rs.10,000/- on each of the units as late fee Commissioner (appeals) dropped penalty imposed under Section 76 of the Finance Act, 1994 and taking note of the fact that the entire amount of service tax and interest was paid before issue of show cause notice reduced the penalties imposed under Section 78 to 25% of the penalties imposed on each of the units. Held that Commissioner (Appeals) reduced the penalties under 78 to the extent of 25% of service tax involved and also set aside the penalties under Section 76 and the decision by him cannot be held unreasonable. Unlike in the case of Central Excise Act, the penalties imposable under Section 76, Section 78 of Finance Act, 1994 are not mandatory in as much as the same are to be moderated in terms of Section 80 of the Finance Act, wherever necessary. decided in favor of assessee

Summary

Issues:
Penalties under Sections 76 and 78 of the Finance Act, 1994 for non-payment of service tax by the respondents in connection with goods transport agency services.

Analysis:
The appeals by the Department, arising from a common order in appeal No. 64-ST/LKO/09, involved three cross-objections connected to the same legal entity, M/s Awadh Transformers Pvt. Ltd. The officers found that the respondents had not discharged their service tax liability for availing goods transport agency services. The original authority imposed penalties under Sections 76 and 78, along with late fees. However, on appeal, the penalties under Section 76 were dropped, and the penalties under Section 78 were reduced to 25% by the Commissioner (Appeals) considering the timely payment of service tax and interest before the show cause notice was issued.

The Tribunal noted that there was a scope for misunderstanding regarding the liability to pay service tax for goods transport agency services. The respondents promptly paid the service tax and interest upon being informed of their liability by the officers. The original authority and the Commissioner (Appeals) both acknowledged the prompt payment and reduced the penalties accordingly. It was emphasized that unlike the Central Excise Act, the penalties under Sections 76 and 78 of the Finance Act, 1994 are not mandatory and can be moderated as per Section 80 of the Act based on the circumstances of the case.

In the judgment, it was concluded that there was no merit in the Department's appeals. Therefore, the appeals were rejected, and the cross-objections supporting the Commissioner (Appeals) order were disposed of accordingly. The decision highlighted the importance of considering the nature of the dispute, the quantum of service tax involved, and the promptness of payment in determining the appropriate penalties under the Finance Act, 1994.

Overall, the judgment provided a detailed analysis of the penalties imposed under Sections 76 and 78 of the Finance Act, 1994 in the context of non-payment of service tax by the respondents for goods transport agency services, emphasizing the significance of timely payment and the discretionary nature of penalties under the Act.