2010 (10) TMI 414 - AT - Service Tax

Non-speaking order - The appellants sought registration belatedly to discharge its obligation under Finance Act, 1994 - The authority below that they did not examine any of the evidence the appellant produced, when the show cause notice alleged that there was collection of Service Tax by the appellant - No levy of penalty automatically without coming to the conclusion that the appellant realized tax and did not deposit the same to the treasury with intent to evade the tax, there cannot be automatic levy of penalty - Hence, the matter is remanded to the ld. Adjudicating Authority to examine the issue threadbare with the material facts and evidence on record, as to whether the ingredients of Section 78 exist to impose penalty.

Issues:
1. Delayed registration under Finance Act, 1994 leading to alleged non-payment of service tax.
2. Allegation of suppression of facts and figures by the appellant.
3. Imposition of penalty under Sections 77 and 78 of the Finance Act, 1994.

Issue 1: Delayed Registration and Alleged Non-Payment of Service Tax
The dispute arose when the appellants sought registration belatedly under the Finance Act, 1994. The appellant was alleged to have collected a sum of Rs. 89,15,270/- for output services rendered, including service tax of Rs. 9,52,147/- for the months of April to June 2008. A show cause notice was issued due to the appellant's failure to discharge the service tax liability despite being registered with the Service Tax Authorities. The notice also highlighted the non-filing of returns by the due dates. The authorities issued the notice for the levy of service tax, education cess, and S & H education cess, along with interest and penalties under the Finance Act, 1994.

Issue 2: Allegation of Suppression of Facts and Figures
The appellant's case was unsuccessful before both lower authorities. The appellant argued that there was no intentional violation of the law and attributed the delay in tax payment and registration to being new in business. The appellant contended that imposing penalties under Sections 77 and 78 would be excessive, especially since they eventually came forward to deposit the service tax. The authorities, however, did not consider the evidence presented by the appellant, leading to the observation that penalties cannot be imposed automatically without establishing that the appellant knowingly evaded tax payment. Mere citation of legal provisions without a thorough examination of evidence does not align with the statutory objectives.

Issue 3: Imposition of Penalties under Sections 77 and 78
The Tribunal found it surprising that the lower authorities did not evaluate the evidence provided by the appellant, especially concerning the alleged collection of service tax. It was emphasized that penalties should not be levied automatically without proving that the appellant willfully evaded tax payment. Consequently, the matter was remanded to the Adjudicating Authority for a detailed examination of the evidence and facts to determine if the conditions under Section 78 for imposing penalties were met. The Adjudicating Authority was directed to provide a fair hearing to the appellant, thoroughly assess the allegations in the show cause notice, and issue a well-reasoned order. The Tribunal set aside the decisions of the lower authorities and instructed the Adjudicating Authority to deliver a comprehensive judgment after reevaluation.

This detailed analysis of the judgment highlights the issues of delayed registration, alleged suppression of facts, and the imposition of penalties under the Finance Act, 1994, providing a comprehensive overview of the Tribunal's decision and the reasoning behind it.

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