2009 (11) TMI 227 - AT - Service Tax

Penalty- the assessee got itself registered with the Central Excise Department as a provider of service under the category of cable operator services in the year 2002. it also paid service tax for the period ending on 31.12.2003. However it stopped paying service tax and filing ST-3 return from January 2004 to December 2005. The adjudicating authority therefore make the demand of service tax and penalty. the Commissioner (Appeals) vacated the penalty as the assessee discharge the liability before the issuance of SCN. Held that- on reading of the provisions of section 76 it is obvious that penalty is imposable for the delay in payment of service tax towards the services rendered by an assessee. This penal liability is not linked to the timing of the timing of SCN for demand of tax not paid. In view of the statutory provisions the assessee was liable to penalty under section 76. The lower appellate authority erred in vacating the penalty. in the circumstances the penalty restored.

Summary

Issues:
Appeal against vacating penalty under section 76 of the Finance Act, 1994.

Analysis:
The case involved an appeal by the Revenue against the order of the Commissioner (Appeals) vacating the penalty imposed on the respondents under section 76 of the Finance Act, 1994. The respondents, a cable operator service provider, had rendered taxable services without following statutory formalities, leading to a demand for service tax and a penalty by the Assistant Commissioner of Central Excise. The Commissioner found that the tax liability was discharged before the show-cause notice, citing a judgment of the High Court of Karnataka. The Revenue argued that the penalty was mandatory under section 76, relying on various case laws emphasizing the imposition of penalties even if tax was paid before the notice. The Revenue contended that discretion was not allowed in imposing penalties, as per the Apex Court's ruling in Union of India v. Dharmendra Textile Processors.

The Revenue further argued that penalties should be restored as per the original authority's decision and cited cases where penalties were upheld even if the duty was paid before the notice. The respondents, on the other hand, contended that penalties should not apply in cases where payment was made before the notice, especially in service tax cases. They argued that penalties under section 11AC could be imposed only in cases involving fraud, collusion, or wilful misstatement of facts, which did not apply in their situation.

Upon considering the case records and submissions, the Technical Member noted that the respondents had stopped paying service tax and filing returns for a period, leading to the penalty under section 76 for the delay in payment. The Technical Member emphasized that the penalty was not contingent on the timing of the show-cause notice but was linked to the delay in paying service tax. Contrary to the Commissioner's decision, the Technical Member found that the respondents were liable for the penalty under section 76 of the Act. Therefore, the appeal filed by the Revenue was allowed, and the penalty imposed by the original authority was restored.