2009 (12) TMI 183 - AT - Service Tax

Erection commissioning and installation and management maintenance repair service- The appellant is engaged in providing the services of erection commissioning and installation management and maintenance of repair service. There was a delay in payment of service tax for the months of April May and July 2006. There is no dispute on the fact that the appellants paid the service tax with interest belatedly but before filing the service tax return. Penalty has been imposed under section 76 of the Finance Act 1994 for delayed payment of service tax and the appellants are in appeal against the same. Commissioner (Appeals) upheld the order. Held that- the appellant definitely deserves a lenient view and application of provisions of section 80 of Finance Act 1994 even if we accept the view taken by the Commissioner (Appeals) that the proceedings cannot be said to have been concluded as the show-cause notice was not issued by invoking provisions of section 73 of Finance Act 1994. Viewed from any angle penalty under section 76 cannot be justified in this case and accordingly the impugned order is set aside and appeal is allowed by way of setting aside the penalty under section 76 of Finance Act 1994.

Summary

Issues:
Delay in payment of service tax leading to penalty under section 76 of the Finance Act, 1994.

Analysis:
The appellant, engaged in providing various services, faced a penalty under section 76 of the Finance Act, 1994 due to delayed payment of service tax for the months of April, May, and July 2006. While there was no dispute regarding the belated payment with interest before filing the service tax return, the appellant contested the penalty imposition. The appellant's argument centered around the inability to pay the service tax due to a strike and lockout, which hindered access to essential records for tax payment. Despite informing the department about the temporary shutdown and requesting provisional payment of service tax, the appellant did not receive any response. Subsequently, after the lockout was lifted, the appellant calculated and deposited the service tax with interest. A show-cause notice proposing penalty under section 76 was issued, which the appellant challenged citing a circular by the Board and section 73(2A) of the Finance Act, 1994.

The department argued that the show-cause notice was issued for contravention of section 68, as per the Commissioner (Appeals) order, rather than section 73. The appellate tribunal analyzed the contentions of both sides and noted that the Commissioner (Appeals) rejected the appellant's reliance on the CBE&C letter, emphasizing that the notice was for penalty under section 76, not section 73. However, the tribunal found section 73(2A) of the Finance Act, 1994 applicable to the case, highlighting the provision's relevance in cases where service tax has been paid with interest, without any suppression of facts or misdeclaration.

The tribunal concluded that as per section 73(2A), once the service tax was paid with interest, no notice should have been served by the Deputy Commissioner. The tribunal clarified that the notice's basis should stem from the service tax return, which, in this case, did not indicate any failure to file the return. Considering the circumstances presented by the appellant, the tribunal deemed the penalty under section 76 unjustified. Thus, the impugned order imposing the penalty was set aside, and the appeal was allowed, leading to the penalty under section 76 being revoked.