2010 (7) TMI 103 - AT - Service Tax

Penalty- payment of service tax before the issuance of SCN- In this case the appellants have collected the service tax amount but not promptly paid to the department as per the finding of the lower appellate authority. In such a case, leniency cannot be shown to the appellants and Section 80 is not applicable but the appellants have paid service tax amount of Rs.5,35,888/- on 30.7.2005 before issue of the show-cause notice, and along with interest. Held that- they are liable to penalty of Rs.91,370/-. Accordingly, the penalty of Rs.6,29,229/- determined by the authorities below is reduced to an amount of Rs.91,370/-. The appeal is thus partly allowed.

Summary

Issues:
Levy of penalty under Section 73 and Section 80 of the Finance Act, 1994 for delayed payment of service tax.

Analysis:
The appellants had paid the service tax amount before the issue of the show-cause notice. The total amount paid was Rs.5,35,888/- on 30.7.2005, and the balance of Rs.91,370/- was paid on 27.1.2007 after the issuance of the SCN on 5.7.2005. The appellants did not contest the levy of service tax and interest but challenged the penalty equal to the total tax amount of Rs.6,29,229/-. The consultant for the appellants argued for leniency in penalty citing the provisions of Section 73 and Section 80 of the Finance Act, 1994.

The learned Consultant contended that since the impugned amount was paid before the issuance of the SCN, a lenient view should be taken, and the penalty should be waived. However, the SDR highlighted that the appellants had collected the service tax amount but did not promptly pay it to the department, as found by the lower appellate authority. In such a scenario, leniency could not be granted, and Section 80 was deemed inapplicable.

The Technical Member observed that Section 73 had undergone changes on 1.7.2003 and 10.9.2004, and the dispute period in this case was from 1.7.2003 to 31.12.2004. The provisions stated that if an assessee pays the service tax amount along with interest, no SCN is required to be issued. Therefore, penal action could not be taken for the amount paid before the issue of the SCN, covering Rs.5,35,888/-. However, for the remaining Rs.91,370/- paid after the SCN, Section 73 and Section 80 could not be applied as the appellants had collected the service tax from customers. Consequently, a penalty of Rs.91,370/- was imposed, reducing the earlier determined penalty of Rs.6,29,229/- to this amount. The appeal was partly allowed, and the stay petition was disposed of.

In conclusion, the judgment addressed the applicability of penalties under Section 73 and Section 80 of the Finance Act, 1994 concerning the delayed payment of service tax, considering the timing of payments in relation to the issuance of the show-cause notice and the collection of service tax amounts from customers.