2013 (8) TMI 52 - AT - Service Tax

Penalty u/s 77 and 78 assessee provided the services of Rent-a-Cab service - Held that - Penalty imposed under Section 78 may be reduced to 25% of the penalty if such payment is made within 30 days - If payment was not made within the time mentioned - full penalty amount have to be paid by the assessee - it was not a fit case for exercise of powers under Section 80 assessee had paid entire tax liability along with interest immediately on pointing out the non-payment - In fact amount slightly more than the demand confirmed was also paid - Court followed the judgement of K.P. Pouches .Vs UOI (2008 (1) TMI 296 - HIGH COURT OF DELHI) appeal rejected with partial relief in favour of assessee.

Summary

Issues:
1. Liability for non-payment of service tax exceeding exemption limit.
2. Imposition of penalties under Section 78 and Section 77 of the Finance Act, 1994.
3. Applicability of powers under Section 80 of the Finance Act, 1994 for waiving penalties.

Analysis:

1. The appellant, a provider of Rent-a-Cab service, registered with the department before the exemption for small service providers was introduced. Upon crossing the exemption limit of &8377; 4 lakhs in a financial year, the appellant ceased paying service tax. However, the Revenue later discovered the non-payment exceeding the exemption limit and issued a Show Cause Notice for the outstanding service tax, interest, and penalties. The appellant contended that the non-payment was unintentional, promptly paid the tax and interest upon detection, but contested the penalties imposed.

2. The appellant's counsel acknowledged the tax and interest liability but challenged the penalties, citing the surrender of registration post-exemption notification as the reason for oversight in exceeding the exemption limit. The appellant argued for leniency in penalty imposition under Section 80 of the Finance Act, 1994, emphasizing the absence of deliberate tax evasion and the immediate settlement of dues upon notification.

3. The Revenue opposed penalty waiver, asserting that the appellant's non-payment was not bona fide, as registration surrender occurred post-understanding the exemption provisions. The Revenue highlighted the delayed tax payment even after crossing the exemption limit, indicating a lack of reasonable cause for non-payment. The Revenue contended that Section 80 could only apply upon demonstrating a reasonable cause for non-payment, which the appellant failed to establish.

4. Upon reviewing the arguments, the Tribunal upheld the Commissioner (Appeals)'s decision that Section 80 powers were inapplicable. However, considering the appellant's prompt payment of the tax liability upon detection, the Tribunal found merit in reducing the penalty under Section 78 to 25% of the tax amount, in line with a precedent from the Hon'ble Delhi High Court. The Tribunal emphasized that the penalty under Section 77 was upheld. The appellant was given a 30-day window to pay the reduced penalty, failing which the full penalty amount would be due.

5. Consequently, the appeal was rejected, except for the partial relief granted by reducing the penalty under Section 78. The Tribunal disposed of the appeal, maintaining the penalty under Section 77 while providing a conditional reduction in the penalty under Section 78 if paid within the stipulated timeframe.