2010 (1) TMI 202 - AT - Service Tax

Penalty- Consulting Engineer s Services- Shri Nalin Sarabhai Shah is engaged in providing Consulting engineering service and he was registered as a service provider of consulting engineering service. The appellant did not pay service tax during the period from October, 2004 to March, 2006 and he did not file the returns also. Consequently, service tax of Rs. 74,500 with interest as applicable was paid by the appellant after it was pointed out by him with interest. Penalty under section 76 equal to duty and a penalty of Rs. 2,000 under section 77 of Finance Act has been imposed. Held that- The appellant is a civil engineer and was regularly paying service tax and suddenly discontinued the same and he did not take any remedial action or he did not even inform the department. He does not seem to have consulted anyone before taking this step. Under these circumstances, I find that penalty under section 76 and section 77 have to be imposed. Thus, the appeal is rejected.

Summary

Issues:
Failure to pay service tax and file returns, Penalty under section 76 and section 77 of Finance Act, 1994, Invocation of section 80 of Finance Act, 1994 for leniency.

Analysis:
The appellant, engaged in providing "Consulting engineering service," failed to pay service tax from October 2004 to March 2006 and did not file returns. After realizing this, the appellant paid the due service tax of Rs. 74,500 with interest and faced penalties under section 76 (equal to duty) and section 77 (Rs. 2,000). The issue primarily revolved around the imposition of penalties.

During the hearing, the appellant's advocate argued that the appellant, although registered and paying service tax, believed he was not liable as he was engaged in repair activities, not consulting engineering services. The advocate acknowledged the appellant's error but sought leniency under section 80 of the Finance Act, 1994. The Departmental Representative (DR) contended that the appellant, being aware of the liability, unjustly ceased payments and returns without justification. The DR cited a Tribunal decision to support the imposition of penalties in such cases.

The adjudicating member noted the appellant's abrupt discontinuation of tax payments without consultation or departmental notification, leading to the imposition of penalties under sections 76 and 77. The member found the DR's referenced Tribunal decision relevant and concluded that no grounds existed to interfere with the lower authorities' orders, ultimately rejecting the appeal.

In summary, the judgment upheld the penalties imposed on the appellant for failure to pay service tax and file returns, emphasizing the appellant's lack of reasonable cause for non-compliance. The invocation of leniency under section 80 of the Finance Act was denied, and the Tribunal's decision in a similar case supported the penalty imposition, resulting in the dismissal of the appeal.