2010 (5) TMI 268 - AT - Service Tax

Penalty Assessee made a default in payment of service tax. Services provided by the assessee fall under the category of Site Formation Service, assessee not taking the Registration and service tax not paid. Part amount paid before issuance of SCN and part before adjudication. Held that penalty not quantified if impugned order and finding absent therein on non-applicability of precedents. Waiver of penalty might have been considered by adjudicating authority if interest payment known. Thus mater remanded.

Summary

Issues:
- Penalty imposed under Section 76 of the Finance Act, 1994
- Delay in registering with the department and paying service tax
- Applicability of penalty waiver under Section 80 of the Act

Analysis:

1. The appeal was filed by ABC Engineering Works seeking to vacate the penalty imposed under Section 76 of the Finance Act, 1994. The appellants had provided services to a Central Public Sector Undertaking without following statutory formalities, leading to a demand for service tax and imposition of penalty by the Commissioner.

2. The appellants argued that the delay in registration and payment of service tax was due to negotiations with the client for reimbursement of the tax liability, citing lack of willful intention to evade payment. They relied on case laws to support their claim that penalty under Section 76 was not sustainable unless there was deliberate defiance of the law.

3. The undisputed facts revealed that the appellants had failed to comply with statutory formalities despite rendering taxable services. The Commissioner found that the appellants suppressed information to evade service tax and failed to pay accrued interest on the tax arrears, leading to the imposition of penalty.

4. The Tribunal noted previous cases where penalties were vacated for late filing of returns, but these decisions were made before subsequent judgments clarified the mandatory nature of penalties for tax evasion due to fraud or willful suppression of facts.

5. Despite the appellants paying most of the tax before the show cause notice and the balance before adjudication, the Commissioner observed a lack of compliance with promises made during the proceedings, leading to the decision not to grant a waiver of penalty under Section 80.

6. The Tribunal found discrepancies in the Commissioner's decision-making process and the failure to consider relevant legal precedents cited by the appellants. The matter was remanded to the adjudicating authority for a fresh decision, emphasizing the consideration of all facts and legal authorities before determining the penalty liability.

7. The judgment highlighted the importance of proving reasonable cause for failures under Sections 76, 77, or 78 to avoid penalties. The case underscored the need for a thorough examination of circumstances and legal principles before imposing penalties for non-compliance with tax regulations.

8. The Tribunal's decision to remand the matter for a fresh adjudication aimed to ensure a fair and comprehensive assessment of the penalty liability in accordance with the law and relevant judicial precedents cited by the appellants.

(Pronounced in the court on 10-5-2010)