2009 (12) TMI 459 - AT - Service Tax

Penalty - The appellants are Multi-system Operator who receive the satellite signals from Broadcaster and pass on the signal to the cable operators for which they were charging some amount. The adjudicating authority confirmed demand of service tax on the assessee and also imposed penalty under section 77, and penalty of Rs. 200 per day under section 76. since the adjudicating authority s order was silent about the interest, the same was taken up for review by the Commissioner who confirmed the demand of interest and also imposed penalty of Rs. 100 per day for the period upto 17.4.2006 and at the rate of Rs. 200 per day for the period of failure w.e.f. 18.04.2006, till the date of payment of service tax. Thus the assessee challenge the penalty. Held that - since penalty u/s 76 is attracted whenever there is non payment of service tax by due date and further since assessee during relevant period did not pay any service tax and no convincing reason was given by assessee for non-payment of service tax, imposition of penalty upon assessee was justified.

Summary

Issues:
- Incorrect utilization of service tax credit by the appellant.
- Imposition of penalty under section 76 of the Finance Act, 1994.

Analysis:

Issue 1: Incorrect utilization of service tax credit by the appellant
The case involved a Multi-system Operator who received satellite signals from a Broadcaster and provided services to cable operators. The services became taxable from 10-9-2004, and the appellant registered for service tax accordingly. However, instead of paying service tax on the amount charged to cable operators, the appellant wrongly took credit of service tax paid by cable operators. This irregularity was discovered during scrutiny of returns filed from October 2004 to March 2005. The appellant paid the due service tax later but faced a show-cause notice for recovery, interest, and penalties. The Commissioner confirmed the demand, interest, and penalties, leading to the present appeal challenging the penalty under section 76.

Issue 2: Imposition of penalty under section 76 of the Finance Act, 1994
The appellant argued that the incorrect payment was due to a misunderstanding during the initial introduction of service tax on multi-system operators. They claimed that the penalty should be waived as it was unintentional and emphasized that they regularly filed returns without the error being pointed out by the Department. On the other hand, the Department defended the penalty, stating that the responsibility lies with the assessee to determine and pay the correct service tax, as there is no system of assessment by the department. The penalty was justified due to the irregularity being detected during scrutiny of returns.

The Tribunal carefully considered both arguments and found that the appellant had indeed failed to pay service tax on the correct amount during the specified period. Despite filing returns and enclosing challans, the appellant's incorrect utilization of service tax credit was a serious issue. The penalty under section 76 was deemed applicable as there was non-payment of service tax within the stipulated period. The Tribunal concluded that the explanation provided for the non-payment was not satisfactory, and therefore, upheld the imposition of penalties. The appeal was dismissed based on these findings.