2010 (1) TMI 305 - AT - Service Tax

Penalty- The appellant-bank works under the control of the Maharashtra State Co-Operative Bank Ltd. Delay in payment of service tax. Appellant bank- strictly following apex bank s circular hence plea of bonafide belief as a ground for benefit of section 80 of Finance Act 1994. acceptable till March 2005. Held that- after amendment of rule appellant cannot raise plea of bonafide belief. Once registered with the department for payment of service tax assessee expected to be aware of the relevant provisions of law for the period April 2005 to March 2007 benefit of section 80 not admissible.

Summary

Issues:
1. Interpretation of Rule 6 of the Service Tax Rules, 1994 regarding the payment of service tax by a bank.
2. Applicability of Section 80 of the Finance Act, 1994 for waiving penalty under Section 76 in case of delayed payment of service tax.
3. Effect of ignorance of law on claiming benefits under Section 80.
4. Comparison of penalties under Section 76 before and after the amendment on 18-4-2006.

Analysis:

Interpretation of Rule 6:
The case involved a bank operating under the Maharashtra State Co-Operative Bank Ltd., which paid service tax based on a circular issued by the apex bank. The bank paid service tax for the period September 2004 to March 2007 as per the circular. However, the bank missed the amendment to Rule 6 effective from 1-4-2005, changing the deadline for service tax payment to the 5th of the following month. The bank argued that they were unaware of the amendment and continued payments as per the circular. The Tribunal noted that the bank's ignorance was acceptable only until February 2005, as the circular did not mention the special provision for March. After the amendment, the bank should have been aware of the new deadline.

Applicability of Section 80:
The appellant sought the benefit of Section 80 of the Finance Act, 1994 to waive penalty under Section 76, citing lack of mala fide intent. The appellant's counsel referenced Tribunal decisions supporting waiver in such cases. However, the Revenue argued that ignorance of the law could not justify the benefit of Section 80. The Tribunal considered the appellant's plea of bona fide belief until April 2005, but post-amendment, the bank should have been aware of the new payment deadline.

Effect of Ignorance of Law:
The Revenue contended that the appellant could not claim ignorance of the law. The Tribunal referred to a High Court judgment and a Tribunal decision where penalties were imposed due to failure to comply with service tax regulations. The Tribunal emphasized that once registered for service tax payment, the appellant was expected to be aware of the relevant laws. Ignorance of the law was not a valid defense post-amendment to Rule 6.

Comparison of Penalties under Section 76:
The Tribunal highlighted the penalties under Section 76 before and after the amendment on 18-4-2006. The original authority did not consider the provisions of Section 76 pre-amendment. The Tribunal noted that for the period until February 2005, there was no delay in payment, so no penalty was applicable. The Tribunal set aside the previous order and remanded the case for further consideration, ensuring the appellant's right to be heard on the issue.

In conclusion, the Tribunal emphasized the importance of compliance with tax regulations, especially post-amendment changes, and the need for entities to stay informed about legal requirements to avoid penalties for delayed payments.