2012 (7) TMI 286 - AT - Service Tax

Penalty under Section 76 and 78 - non-payment of service tax due to financial hardship after being pointed out, discharged their service tax liability along with interest Held that - case is covered by the provisions of Section 73(3) of the Finance Act and, hence, penalty under Section 76 and 78 is not called for.

Summary

Issues:
1. Imposition of penalty on the respondent under Section 76 & 78 of the Finance Act, 1994.
2. Condonation of delay in filing the cross objection.
3. Whether penalty under Section 76 and 78 is justified.

Analysis:
1. The Revenue filed an appeal seeking imposition of penalty on the respondent under Section 76 & 78 of the Finance Act, 1994. The respondent, a sub-broker, had stopped paying service tax and filing returns until an inquiry in 2008 revealed their outstanding service tax liability. The Asstt. Commissioner confirmed the demand but refrained from imposing penalties under Section 76 and 78, citing no grounds for wilful evasion. The Commissioner (Appeals) upheld this decision, leading to an appeal to the Tribunal by the Revenue and a cross objection by the respondent.

2. The delay of 5 days in filing the cross objection was condoned by the Tribunal after considering genuine reasons for the delay presented by the respondent.

3. The Tribunal found that the respondent's non-payment of service tax from April 2006 was due to financial difficulties, despite having paid taxes till March 2006. Upon detection, the respondent promptly paid the outstanding amount with interest. The case was deemed to fall under Section 73(3) of the Finance Act, where immediate payment upon detection exempts from penalties under Section 76 and 78. As there was no dispute regarding the financial difficulties faced by the respondent and the prompt payment upon detection, the Tribunal dismissed the Revenue's appeal and disposed of the respondent's cross objection, finding no infirmity in the lower authorities' decisions.

This detailed analysis of the judgment highlights the key issues involved and the Tribunal's reasoning behind the decision on each issue.