2010 (2) TMI 340 - AT - Service Tax

Stay-Penalty- The appellant had provided outdoor catering service to their clients viz. The National Institute of Bank Management (NIBM) but did not pay service tax in respect of the catering charges received from NIBM. They were not even registered with the department as outdoor caterers. Held that- conduct of appellant not indicating bonafide belief. Prima facie good cause not made out for penalty waiver under section 80. pre-deposit of Rs. 2 lakhs directed.

Summary

Issues:
Waiver of pre-deposit and stay of recovery in respect of penalty amount imposed under Section 78 of the Finance Act, 1994.

Analysis:

1. Background and Allegations:
The appellant provided outdoor catering services to clients without paying service tax during the period of dispute. The department issued a show-cause notice demanding service tax and Education Cess totaling to Rs. 5,03,703/- under Section 73(1) of the Finance Act, 1994. The appellant paid the tax and interest in instalments after receiving the notice. The original authority imposed a penalty of Rs. 5,03,703/- under Section 78 of the Act.

2. Contentions and Findings:
The appellant contended that they believed in good faith that they were not liable to pay the service tax and faced financial difficulties in recovering the tax from clients. However, the tribunal found that the appellant's conduct did not demonstrate a genuine belief in their innocence. The appellant admitted liability but did not pay the tax for the disputed period, even after receiving the show-cause notice and did not respond to the notice. The tribunal considered the allegations in the notice as conceded, making the penal liability under Section 78 undeniable.

3. Decision and Direction:
The appellant appealed for waiver of the penalty under Section 78 but failed to establish a valid reason under Section 80. The tribunal directed the appellant to pre-deposit Rs. 2,00,000 out of the total penalty amount within four weeks for the appeal to proceed. Despite the appellant's plea, the tribunal took a lenient approach in granting the pre-deposit order.

This judgment highlights the importance of timely compliance with tax obligations, the significance of demonstrating genuine belief in tax liabilities, and the consequences of non-payment leading to penalties under the relevant provisions of the Finance Act, 1994.