2009 (10) TMI 287 - AT - Service Tax

Penalty- The assessee held centralized registration for various taxable services. For the relevant period, it filed its returns. On verifications of the same, the adjudicating authority noticed that the assessee had made payment of service tax along with interest after due date. Consequently, after adjudication, penalty had been imposed on the assessee under section 76. on appeal, the Commissioner (Appeals) upheld the said order. Held that- it was found that what had happened in the case of the assessee was only a bonafide mistake and needless to say it would have to rectify those defects in future. Taking note of the fact that service tax had been paid with interest wherever there was a delay, before issue of show cause notice, it was fit case for invoking the provision of section 80 and allowing the appeal.

Summary

Issues:
- Delay in payment of service tax and imposition of penalty under section 76.
- Applicability of penalty considering the reasons for delay provided by the appellant.
- Invocation of provisions of section 80 of the Finance Act, 1994.

Analysis:
1. Delay in Payment of Service Tax and Imposition of Penalty under Section 76:
The appellants, holding valid centralized registration for various taxable services, filed ST3 returns for a specific period but made service tax payments after the due date, resulting in interest payment of Rs. 4,182. Subsequently, penalty under section 76 was imposed for each month where a delay equal to the amount of service tax payable was observed.

2. Applicability of Penalty Considering Reasons for Delay Provided by the Appellant:
The advocate representing the appellants argued that the delay in tax payment was due to the complex nature of their business operations involving multiple departments, foreign payments, and the need for legal expert advice to determine the correct service tax category. The delay was attributed to the time-consuming process of examining payment details, contracts, and tax applicability. The appellant's submission emphasized the unintentional nature of the delay, supported by voluntary payment with interest, indicating bona fide intentions. However, the Appellate Commissioner did not address these justifications.

3. Invocation of Provisions of Section 80 of the Finance Act, 1994:
After considering arguments from both sides, the Technical Member of the Appellate Tribunal acknowledged the appellant's delay as a bona fide mistake, emphasizing the need for rectification in future compliance. Noting that service tax was paid with interest before the issuance of a show-cause notice, the Technical Member deemed it a suitable case to invoke the provisions of section 80 of the Finance Act, 1994. Consequently, the appeal was allowed, indicating leniency towards the appellant's circumstances and compliance efforts.

In conclusion, the judgment by the Appellate Tribunal, Ahmedabad, highlighted the importance of considering the reasons behind delays in tax payments, especially in cases where genuine mistakes or complexities in business operations contribute to such delays. The decision to allow the appeal under section 80 of the Finance Act, 1994, reflected a balanced approach, taking into account the appellant's efforts to rectify the situation and fulfill their tax obligations in good faith.