2013 (6) TMI 645 - AT - Service Tax

Penalty - Non deposit of amount of service tax collected from the client - Held that - since there is no dispute that the appellant had already collected the amount of service tax liability which has been confirmed and upheld by the first appellate authority, the appellant is liable to penal provisions under Section 76. Penalty u/s 78 - Held that - penalty is liable to be imposed on the appellant under Section 78, as they have collected the amount of service tax from their clients and not reflected but said collected service tax liability in half yearly return filed with the revenue authorities, appellant was correctly visited with penalty. - the first appellate authority having reduced the service tax liability on the appellant to Rs.2,47,032/- has not given an option to the appellant for discharge of the penalty under the provisions of Section 78 which needs to be extended to the appellant. - Following the decision in the case of Akash Fashions 2009 (1) TMI 113 - GUJARAT HIGH COURT benefit of payment of penalty of 25% extend to the appellant.

Summary

Issues:
1. Service tax liability for services rendered to M/s. Tata Project Ltd.
2. Application of Section 73(3) of the Finance Act, 1944.
3. Imposition of penalties under Section 76 & Section 78 of the Finance Act, 1944.

Service Tax Liability:
The appellant rendered services to M/s. Tata Project Ltd. during February 2004 and raised five invoices in January and February 2004. The revenue authorities found that the appellant did not deposit the service tax collected from M/s. Tata Project Ltd. into the government treasury. The adjudicating authority confirmed a service tax demand of Rs.7,40,996/- along with interest and penalties under Section 76 & Section 77 of the Finance Act, 1944. The first appellate authority concluded that service tax liability for Erection, Commissioning, and maintenance of repair services was introduced from 10.09.04, excluding most invoices except one dated 29.02.04. The first appellate authority upheld the service tax liability, interest, and penalties on this specific invoice.

Application of Section 73(3):
The appellant argued that they deposited the entire service tax liability and interest before the show cause notice was issued, invoking the provisions of Section 73(3) of the Finance Act, 1944. The Department contended that the appellant, registered under service tax for different categories, did not disclose the receipt of amounts from the invoices in their return for the period 01.04.05 to September 2005. The Department asserted that penalties under Section 76 & Section 78 were justified due to the appellant's failure to pay the collected service tax to the government.

Imposition of Penalties:
The Tribunal found that the appellant accepted and discharged the service tax liability in February 2006. Given the appellant's registration under service tax and knowledge of the relevant laws, the Tribunal upheld the penalties under Section 76. The adjudicating authority had imposed a penalty of Rs.15,000/-, which the Tribunal considered just. Regarding the penalty under Section 78, the Tribunal upheld its imposition due to the appellant's collection of service tax from clients without reflecting it in the returns. However, the Tribunal extended the benefit of payment of 25% of the penalty amount to the appellant, following a High Court judgment, provided the appellant complies within thirty days.

In conclusion, the Tribunal partly allowed the appeal by upholding the penalties imposed under Section 76 and Section 78 but granted the appellant the benefit of discharging 25% of the service tax as a penalty. The appellant was directed to deposit the specified penalty amount within thirty days to avoid further collection of penalties.