2010 (9) TMI 87 - AT - Service Tax

Panalty on short payment of interest- there was a delay in payment of service tax for the period November 2006 to March 2007- The revenue imposed penalty-court remanded the case back to the adjudicating authority to re-calculate the penalty after considering the contention of the appellant that for the purpose of penalty, December 2006 and March 2007 need not have to be taken into consideration.

Summary

Issues: Delay in payment of service tax, imposition of interest and penalties under Section 76 of Finance Act, 1994, consideration of specific months for penalty calculation.

In this case, the appellant, engaged in providing construction services, faced a delay in payment of service tax during November 2006 to March 2007. A show cause notice was issued on 23.4.08, highlighting the delay and proposing the recovery of interest and penalties under Section 76 of the Finance Act, 1994. The appellant's Chartered Accountant admitted to a delayed interest payment of Rs.5,622 in August 2009 due to miscalculation for November 2006 and January 2007. The appellant argued that Section 73(3) of the Act should not apply when interest is not paid before the show cause notice, regardless of the reason. The appellant also contended that penalties should not include amounts from December 2006 and March 2007, as interest and service tax for those months were paid in full before the notice. The Tribunal found merit in this argument and remanded the matter to the original adjudicating authority for a re-calculation of penalties, considering the appellant's contentions.

The Tribunal upheld the imposition of penalty under Section 76 of the Finance Act, 1994, noting that the appellant collected service tax but faced financial difficulties in making the payment. As a result, the provisions of Sections 73(3) and Section 80 of the Finance Act, 1994 were deemed inapplicable. The Tribunal emphasized that penalties should be re-evaluated by excluding amounts related to December 2006 and March 2007, as those months had no delayed payments. The original adjudicating authority was instructed to reconsider the penalty issue in light of the appellant's arguments, ensuring a fair opportunity for the appellant to present their case. The decision was dictated and pronounced in court, marking the conclusion of the Tribunal's judgment.