2010 (3) TMI 480 - AT - Service Tax

Penalty - The appellant is a provider of taxable services as a Cable T.V. Operator. They have collected service tax from their clients and the value of the taxable services declared to the Department was lower than the value of the service charges received by them. Subsequently, assesese paid balance of service tax. Original authority apart from confirming demand of duty, imposed penalty. Held that - since it was a clear case of suppression of value of taxable service to department, penalty u/s 78 was warranted.

Summary

Issues:
1. Appellant's liability for service tax under-declaration.
2. Imposition of penalties under sections 76 and 78 of the Finance Act.

Analysis:
1. The appellant, a Cable T.V. Operator, under-declared the value of taxable services to the Department, resulting in a shortfall in the service tax payment. The Department discovered this discrepancy during an investigation with the Multi System Operators (MSO). The Original Authority confirmed the duty demand and imposed penalties under sections 76 and 78 of the Finance Act. The appellant argued that the under-declaration was due to an employee's mistake and personal circumstances, seeking leniency in penalty imposition.

2. The appellant's representative contended that the penalties imposed were overly severe, considering their status as a small service provider and the circumstances leading to the under-declaration. On the other hand, the Senior Departmental Representative (SDR) maintained that the penalties were justified due to the deliberate suppression of taxable service values. The SDR highlighted that the penalties under sections 76 and 78 could be simultaneously imposed during the relevant period.

3. Upon reviewing the case, the Tribunal acknowledged the suppression of taxable service values by the appellant, deeming the explanation for the underpayment inadequate. However, considering the circumstances and the amount of service tax evaded, the Tribunal found the initial penalties excessively harsh. Consequently, the Tribunal partially allowed the appeal by reducing the penalty under section 78 and setting aside the penalty under section 76. The demand for service tax and interest remained uncontested and were upheld.

In conclusion, the Tribunal recognized the appellant's under-declaration of taxable services but opted for a more lenient approach in penalty imposition, taking into account the specific circumstances and the amount of tax evaded. The decision balanced the need for penalty enforcement with considerations of fairness and proportionality in the given case.