2012 (8) TMI 499 - AT - Service Tax

Short payment of service tax and delay in payment - Held that - The strict procedure of applying for provisional assessments or refund may not be applied in this case considering the facts that this was initial period of service tax levy and procedures had to evolve and settle As the impugned service tax was always collected along with the bill amount and the money was always lying in the account of GOI a Department of GOI during the relevant period, was constrained in its method of collection of bills including service tax and adjustment thereof from one account of the GOI to the account of GOI for receiving service tax due to instructions issued by GOI, thus the amounts paid by customers inclusive of service tax were always in Government account and this is a matter of just adjustment of money from one account of GOI to another account of GOI. The short payment of tax for the disputed period is also very small - as the excess payment of tax deposited by the respondent for subsequent period was admittedly provisional there is no tax due from the respondent in the impugned matter - no need to collect any interest in the case of delay in deposit of service tax by Department of Post - in favour of assessee.

Issues:
Short payment of service tax and delay in payment of service tax for the period 07/94 to 09/96; applicability of interest and penalties on a Department of Government of India (GOI); validity of provisional assessments and excess payments made by the respondent.

Analysis:
1. The appeal filed by Revenue concerns the dispute over the short payment and delay in payment of service tax by the respondent for the period 07/94 to 09/96. The adjudication order indicated a service tax amount of Rs. 74,693/- with additional interest and penalties imposed under sections 76, 77, and 79 of the Finance Act 1994. The Commissioner (Appeal) set aside the order, citing provisional assessments and excess payments made by the respondent for subsequent periods. The Revenue challenged this decision, arguing that interest and penalties are applicable to the Department of GOI as well.

2. The Revenue contended that the respondent did not request provisional assessment during the disputed period and only did so for a later period. They claimed a short payment of service tax and emphasized that the Act applies equally to the Department of GOI, necessitating the payment of interest and penalties. The Revenue disputed the findings of the Commissioner (Appeal) regarding provisional assessments.

3. The respondent argued that the initial period of service tax implementation posed challenges in determining the exact tax amounts due to the nature of bill payments received through various post offices. They asserted that payments and assessments were provisional, highlighting excess payments made during the disputed period and a subsequent period. The respondent maintained that no further tax was owed for the period in question.

4. Additionally, the respondent, being a Department of the GOI, explained that delays in fund transfers between government accounts should not warrant interest charges. They referenced a Tribunal decision supported by the Karnataka High Court to bolster their argument regarding the nature of their operations during the relevant period.

5. Regarding penalties, the respondent contended that as a department of the GOI navigating a nascent service tax regime, penalties should be waived under section 80 of the Finance Act 1994. They emphasized compliance with government instructions in bill collection and fund transfers as reasons to exempt them from penalties.

6. The Tribunal deliberated on the arguments presented, noting the respondent's claims of excess payments and the evolving procedures during the initial phase of service tax implementation. Considering the provisional nature of assessments and the respondent's adherence to government instructions, the Tribunal found no tax liability for the disputed period, especially as Revenue did not address the excess payments made by the respondent for subsequent periods.

7. Citing a precedent from the Karnataka High Court on interest waiver for service tax delays by the Department of Post, the Tribunal deemed this case suitable for penalty waiver under section 80 of the Finance Act 1994. Consequently, the Tribunal rejected the Revenue's appeals and stay petitions.

This detailed analysis of the legal judgment addresses the issues of short payment of service tax, delay in payment, applicability of interest and penalties, provisional assessments, and excess payments, providing a comprehensive overview of the arguments and findings in the case.

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