2010 (2) TMI 137 - AT - Service Tax

Maintenance or Repair Service - during the period from October, 2006 to March, 2007 they committed default of service tax in respect of the transactions for the said period. Later on, they paid the tax with interest on 06/10/2007. The service tax return was filed on 22/01/2008. In a show-cause notice dated 05/06/2008, the department demanded an amount of Rs. 28/- as differential interest on service tax under Section 75 of the Finance Act, 1994 and also proposed to impose penalty of Rs. 87,003/- under Section 76 of the Act. Held that This provision of section 73(3) restrains the department from issuing any show-cause notice for demand of service tax from an assessee where they have already self-determined and paid up the tax under intimation to the department. This provision of law in no manner restrains the authorities from taking penal action against such an assessee for default / delay of payment of service tax. This is what happened in the instant case. The extent of penalty which could be imposed on an assessee in appropriate circumstances like those obtaining in the present case, under Section 76, is Rs. 200/- per day or @ 2% of the amount of tax per month, whichever is higher. Decided against the assessee

Summary

Issues:
1. Liability for penalty under Section 76 of the Finance Act, 1994 for delayed payment of service tax.

Analysis:
The appellant, engaged in retreading of tyres, registered for 'Maintenance and Repair Service' in 2005, defaulted in paying service tax from October 2006 to March 2007. Despite later paying the tax with interest, a show-cause notice demanded differential interest and proposed a penalty under Section 76. The appellant argued they should not be penalized as they paid before the notice, citing Section 73(3) and a Tribunal decision. The department relied on other cases to justify the penalty.

The main issue was the penalty under Section 76. The appellant contended that paying tax before the notice precluded penalty, questioning the show-cause notice's validity. They argued lack of intent to evade tax and disputed reliance on certain cases. The Tribunal noted Section 76 allows penalty for service tax default without requiring intent to evade tax. The appellant's registration since 2005 implied awareness of tax liability, making the delay inexcusable. The Tribunal emphasized the appellant's failure to invoke Section 80 to avoid penalty and rejected arguments on Section 73(3) not preventing penal action for tax delay. The penalty could be Rs. 200 per day or 2% of tax per month, exceeding the tax amount in this case. Despite the penalty equaling the tax, the Tribunal upheld it, leading to the appeal's dismissal.

In conclusion, the Tribunal dismissed the appeal, emphasizing the appellant's failure to provide a valid reason under Section 80 to avoid penalty and rejecting arguments on Section 73(3) preventing penal action for tax delay. The penalty under Section 76 was upheld despite exceeding the tax amount, as the appellant's delayed payment warranted penalization.