2006 (7) TMI 40 - AT - Service Tax

Service Tax Delay for the period prior to registration certificate cannot be treated as delay No deliberate intention on part of assessee much less any mens rea in delaying payment of service tax - Appellant regularly paid service tax during last decade Penalty set aside

Summary

Issues: Registration under Service Tax Act, Late payment penalty, Intention of delay

In this case, the appellant, a member of the National Stock Exchange providing stock broking services, was required to pay service tax under Section 68 of the Finance Act, 1994. The appellant commenced business activity by October 25, 1995, and applied for registration within the stipulated 30-day period, receiving the certificate in December 1995. Despite no business transactions in October 1995, some activities occurred in November 1995, with service tax paid by January 19, 1996, incurring a 4-day delay. The adjudicating authority penalized the appellant for late payment, considering the period before registration as delay. However, it was noted that there was no deliberate intention or mens rea to delay payment, with the appellant consistently punctual in service tax payments over the past decade.

The primary issue addressed was the imposition of a penalty for late payment of service tax. The appellate tribunal found the penalty unwarranted, setting it aside due to the lack of intentional delay and the appellant's history of timely payments. The tribunal emphasized that the period before registration should not be considered as delay, especially when there was no deliberate intention to delay payment. The appellant's promptness in meeting tax obligations over the years was a crucial factor in overturning the penalty.

The judgment highlights the importance of considering the circumstances leading to late payment penalties, especially in cases where there is no deliberate intent to delay payment. The tribunal's decision underscores the need to assess each situation individually, taking into account factors such as promptness in tax compliance and the absence of mens rea in determining the appropriateness of penalties. By setting aside the penalty, the tribunal recognized the appellant's compliance history and the lack of intentional wrongdoing in the delayed payment, ultimately allowing the appeal.