2010 (5) TMI 219 - AT - Service Tax

Penalty- Default in payment of tax- that the appellant, a provider of Real Estate Agency service, had failed to obtain registration certification and pay the service tax due thereon, under the provisions of Service Tax Act and Rules. The Appellant give the reason that service tax levy on this service was new and they have no knowledge about it. Held that- penalty u/s 78 set aside but explanation that tax not paid due to financial problems and market conditions, not acceptable. Assistance of Department not sought for payment of tax in installments. Penalty u/s 76 is upheld.

Summary

Issues:
1. Failure to obtain registration certification and pay service tax.
2. Challenge against imposition of penalties under Sections 76 and 78 of the Finance Act, 1994.

Analysis:

Issue 1: Failure to obtain registration certification and pay service tax
The appellant, a provider of "Real Estate Agency" service, failed to obtain registration certification and pay the service tax due under the Service Tax Act and Rules. The appellant paid a sum of Rs. 2,35,119/- along with interest in November 2005 and the balance amount upon issue of a show cause notice. The lower authority confirmed the demand of Rs. 2,52,875/- along with interest and imposed penalties under Sections 76 and 78 of the Finance Act, 1994. The appellant accepted the service tax payment and interest liability but challenged the penalties imposed. The Commissioner (Appeals) upheld the Order-in-Original, leading to this appeal.

Issue 2: Challenge against imposition of penalties under Sections 76 and 78
The appellant challenged the imposition of penalties under Sections 76 and 78 of the Finance Act, 1994. The appellant argued that non-payment of service tax was due to ignorance of the law regarding the levy on "Real Estate Agents Service," which was a new issue. The Departmental Representative contended that the appellant had registered for services in November 2004 but paid the service tax for the period 1999 to 2004 only in November 2005. The Tribunal found that the appellant's failure to pay service tax earlier was not justified by financial difficulties, as the appellant could have sought assistance from the department for installment payments. The Tribunal set aside the penalty under Section 78 but upheld the penalty under Section 76, amounting to Rs. 100/- per day for failure to pay service tax until the discharge of the tax liability, limited up to the confirmed tax liability.

In conclusion, the Tribunal disposed of the appeal by setting aside the penalty under Section 78 but upholding the penalty under Section 76. The appellant's challenge against the penalties imposed by the lower authorities was partially successful, with the penalties being adjusted based on the Tribunal's findings.