2009 (7) TMI 1075 - AT - Service Tax

Summary

Issues:
- Application to dispense with the condition of pre-deposit of penalty imposed under Section 76 of the Finance Act, 1994.
- Interpretation of Section 80 of the Act regarding reasonable cause for non-payment of tax.
- Determination of penalty under Section 76 for failure to pay tax.

Analysis:

1. The appellant sought to dispense with the pre-deposit of penalty of Rs. 71,307 imposed under Section 76 of the Finance Act, 1994, citing non-payment of tax for four quarters. The appellant, a Manpower Recruiting Agency in a remote village, argued that the absence of an authorized bank in the area hindered tax payment. The appellant's Chartered Accountant contended that this constituted a reasonable cause under Section 80 of the Act, warranting the penalty to be set aside, especially since the service tax along with interest was paid before the show cause notice was issued.

2. The Respondent, a registered service tax assessee under the same category, opposed the appellant's arguments, alleging mala fide due to non-payment of tax for four quarters. The Respondent emphasized that Section 76 mandates a penalty of Rs. 200 per day for such failures, indicating that the entire penalty amount should be deposited by the appellant.

3. The judgment highlighted that the appellant, being a registered service tax assessee, was aware of the legal obligation to pay tax, negating any claim of ignorance. The lack of justification for non-payment during the relevant period supported the decision that Section 80 could not be invoked in the appellant's favor. Additionally, the judgment referenced the Supreme Court's ruling in Dharamendra Textile Processors, emphasizing the inflexibility in reducing penalties for contraventions, leading to the directive for the appellant to deposit the penalty amount within a specified timeframe.

4. Ultimately, the tribunal concluded that the appellant failed to establish a strong prima facie case in their favor concerning the penalty under Section 76. As a result, the tribunal directed the appellant to comply with the penalty deposit requirement within eight weeks and report back for final disposal of the appeal. The judgment underscored the legal obligations of registered service tax assessees and the stringent penalties for non-compliance, aligning with the statutory provisions and judicial precedents in determining the penalty in this case.