2006 (4) TMI 39 - AT - Service Tax

Service Tax - Security Agency - The appellant failed to include the certain elements for payment of service tax such as provident fund, contribution of ESI, gratuity, bonus etc - Penalty reduced

Summary

Issues:
- Failure to include certain elements for payment of service tax
- Imposition of penalties under Sections 76 and 79 of the Finance Act, 1994
- Challenge against the imposition of penalties

Analysis:
The appellant, a holder of registration for payment of service tax in relation to security service, failed to include elements like Provident Fund, ESI Contribution, Gratuity, and Bonus while paying service tax for a specific period. Consequently, the Revenue initiated penal action for the unpaid service tax. The appellant contended that the omission was due to a genuine belief that these elements were not required to be included, with no intent to evade tax. Despite paying the tax post-adjudication, penalties were imposed under Sections 76 and 79 of the Finance Act, 1994, which the appellant vehemently contested.

During the proceedings, the appellant's advocate argued that the amounts were omitted in good faith and highlighted Section 80 of the Act, which provides for penalty waiver in cases of non-payment due to a genuine belief. Conversely, the Revenue representative pointed out that the appellant had not provided all necessary information to the Department, alleging suppression of facts and invoking penalty under Section 76 at the rate of Rs. 100 per day.

In response, the appellant's counsel referred to a judgment by the Hon'ble High Court of Karnataka, emphasizing the discretionary nature of penalties under Section 76 of the Act. After hearing both parties, the Tribunal observed a violation by the appellant in omitting certain elements essential for service tax payment. While upholding the lower authorities' orders, the Tribunal, considering the circumstances, reduced the penalties from Rs. 50,000 to Rs. 10,000 under Section 76 and from Rs. 14,000 to Rs. 5,000 under Section 79. The stay application and appeal were thus disposed of with the revised penalty amounts, aiming to serve the ends of justice.