2010 (2) TMI 324 - AT - Service Tax

Default in payment of tax- Show cause notice was issued proposing Service Tax amounting to Rs. 1, 06, 253/- relating to the period from May 2006 to September 2006 and the same was confirmed by the original authority along with interest. A sum of Rs. 1, 06, 253/- was imposed as penalty under Section 76 of the Act. The appellants filed appeal before the Commissioner (Appeals) and submitted that inasmuch as they are referred to BIFR they are not in a position to pay Service Tax and penalty. Commissioner(Appeal) reduced the penalty. Held that- impugned order upholding demand of service tax and interest sustainable. Penalty though reduced in impugned order full benefit under section 80 can be given. Penalty set aside.

Summary

Issues:
Short payment of Service Tax, imposition of penalty under Section 76 of the Act, liability to pay Service Tax and interest, reduction of penalty under Section 80 of the Finance Act.

Analysis:
The case involved an appeal against the order of the Commissioner (Appeals) regarding the imposition of Service Tax amounting to Rs. 1,06,253/- for a specific period, along with interest and penalty under Section 76 of the Act. The original authority confirmed the Service Tax and penalty but decided in favor of the appellants regarding the credit of Service Tax. The Commissioner (Appeals) reduced the penalty to Rs. 25,000/- but upheld the demand for Service Tax and interest, considering the financial crisis faced by the appellants. The learned SDR argued that there was no dispute about the liability to pay Service Tax and interest as admitted before the original authority, and the reduction in penalty was a substantial concession under Section 80 of the Finance Act.

Upon reviewing the submissions, it was noted that the appellants had defaulted in paying Service Tax for five months due to financial difficulties, although they had been consistent in paying from October 2005. The liability to pay tax and interest was acknowledged before the original authority, leading to the Commissioner (Appeals) upholding the demand for Service Tax and interest. The Tribunal found the decision reasonable and declined to interfere with it. However, considering the circumstances and the reduction in penalty by the Commissioner (Appeals) under Section 80 of the Finance Act, the Tribunal decided to provide full benefit under this provision. Consequently, the penalty of Rs. 25,000/- was set aside, and the appeal was allowed in this regard.