2009 (10) TMI 286 - AT - Service Tax

Penalty- M/s. V.M. Engineering Works has been registered as a service provider of construction service and during the scrutiny of their periodical returns it was noticed that appellants had made payment of service tax belatedly in respect of two quarters from April, 2007 to December, 2007. Proceedings were initiated which resulted in imposition of penalty of Rs. 22,800 under section 76 of the Finance Act, 1994 on the respondents. On an appeal filed by them, the Commissioner (Appeals) in the impugned order reduced the penalty from Rs. 22,800 to Rs. 8,000. Held that- I agree with the rationale adopted by the Commissioner (Appeals) in coming to the conclusion that the respondents deserve a lenient treatment by resorting to the provisions of section 80 of the Finance Act, 1994. Thus, reject the appeal filed by the revenue.

Summary

Issues:
Penalty imposition under section 76 of the Finance Act, 1994 for belated service tax payment. Reduction of penalty by the Commissioner (Appeals) from Rs. 22,800 to Rs. 8,000. Appeal by revenue against the lenient view taken by the Commissioner (Appeals) and reliance on section 80 of the Finance Act, 1994. Consideration of previous Tribunal decisions supporting penalty imposition. Evaluation of the appellant's history of service tax compliance and the amount of tax paid. Application of section 80 of the Finance Act, 1994 to reduce the penalty.

Analysis:
The case involved M/s. V.M. Engineering Works, a service provider of construction service, who faced penalty under section 76 of the Finance Act, 1994 for delayed service tax payment in two quarters from April to December 2007. The Commissioner (Appeals) reduced the penalty from Rs. 22,800 to Rs. 8,000. The revenue appealed against this reduction, arguing that the case did not warrant a lenient view under section 80 of the Finance Act, 1994. The revenue contended that the penalty should not have been reduced based on previous Tribunal decisions, emphasizing that the appellant's history of non-compliance and the amount of tax paid were not sufficient grounds for leniency.

The Tribunal considered the revenue's arguments and the memorandum of appeal. The Commissioner (Appeals) had analyzed the case, noting the specific delays in tax payments and the appellant's registration history since 2005-06. The Commissioner found that the appellant, being a small unit, had paid a portion of the total tax liability and had no previous lapses. Relying on a Tribunal decision, the Commissioner invoked section 80 of the Finance Act, 1994 to reduce the penalty to Rs. 8,000 from Rs. 22,200. The Tribunal agreed with this reasoning, affirming that the appellant deserved leniency under section 80. Therefore, the Tribunal rejected the revenue's appeal, upholding the Commissioner (Appeals)' decision to reduce the penalty based on the circumstances and application of section 80 of the Finance Act, 1994.