2014 (4) TMI 957 - AT - Service Tax

Penalty under Section 76 & 78 read with Section 80 - Held that - appellant had not taken the registration initially and took registration only in October 2003. We also note that that even after taking the registration, half yearly returns of service tax were not filed. The service tax returns were filed in 2006 after initiation of the investigation by the revenue. We have also gone through the annexure to the show-cause notice which details the date of payment of service tax as also period involved. We find that except in the case of Business Auxiliary Service where the tax was paid regularly from April 2005 to March 2006, in respect of no other service, the service tax has been paid on due dates. Even wherever the tax amount has been paid, tax has not been paid for the total value of taxable service but only a small part of the service. A perusal of the said two Sections indicate that penalty is imposable on an assessee in the event of his failure or as enumerated under the two Sections. As elaborated earlier, appellant has been continuously failing to pay service tax even after collecting and has paid the said tax after a long delay. We therefore hold that Section 76 is correctly invoked and penalty under Section 76 is correctly imposed. Similarly we find that ingredients of Section 78 are clearly visible in the present case. There have been suppression of facts as inasmuch as the duty was not paid on time, returns were not filed for years together after the due date and even when the returns were filed after initiation of investigation, these did not represent the facts correctly. We are therefore hold that penalty under Section 78 is also imposable - Decided against assessee.

Issues Involved:
1. Non-payment and delayed payment of service tax.
2. Issuance of show-cause notice under Section 73(3) of the Finance Act, 1994.
3. Imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994.
4. Applicability of Section 80 of the Finance Act, 1994 for waiving penalties.

Issue-wise Detailed Analysis:

1. Non-payment and Delayed Payment of Service Tax:
The appellant, a private limited company engaged in various taxable services, took service tax registration on 10.10.2003 but failed to file service tax returns until September 2006. Despite collecting service tax from customers, the appellant did not deposit the tax into the government account on due dates, and the amounts deposited were significantly less than the tax liability. This continued until the investigation began in June 2006. The appellant admitted to unpaid service tax for the year 2004-05 amounting to Rs.92,50,777/- and paid a part of this amount along with interest. A show-cause cum demand notice was issued on 24.08.2008 for Rs.5,85,86,971/- covering the period from April 2003 to March 2007. By this time, the appellant had paid Rs.5,57,22,052/- and interest of Rs.70,66,597/-.

2. Issuance of Show-Cause Notice under Section 73(3) of the Finance Act, 1994:
The appellant contended that since a substantial amount was paid before the issuance of the show-cause notice, no notice should have been issued under Section 73(3) except for the differential amount of Rs.28,64,919/-. The appellant argued that the issuance of the show-cause notice violated Section 73(3) and cited several judgments to support their claim that no penalty should be imposed under the circumstances. However, the Tribunal noted that Section 73(4) excludes cases involving fraud, collusion, willful misstatement, or suppression of facts from the purview of Section 73(3). Given the appellant's conduct, the Tribunal held that the show-cause notice was correctly issued.

3. Imposition of Penalties under Sections 76, 77, and 78 of the Finance Act, 1994:
The Tribunal observed that the appellant failed to take registration initially and did not file service tax returns until after the investigation began. Even then, the returns did not reflect the correct taxable value. The appellant collected service tax but did not remit it to the government, indicating suppression of facts and willful intent to evade tax. The Tribunal upheld the imposition of penalties under Sections 76 and 78, stating that the appellant's continuous failure to pay service tax on time and the incorrect returns justified the penalties.

4. Applicability of Section 80 of the Finance Act, 1994 for Waiving Penalties:
The appellant argued that the penalties should be waived under Section 80 due to reasonable cause, attributing the delay and irregularities to the misconduct of an independent Chartered Accountant. The Tribunal rejected this argument, stating that the appellant is responsible for the acts of their agent (the Chartered Accountant). The Tribunal concluded that the appellant failed to prove reasonable cause for their failure to pay the correct amount of tax on due dates.

Conclusion:
The Tribunal dismissed the appeal, finding no merit in the appellant's arguments. The penalties under Sections 76 and 78 were upheld, and the issuance of the show-cause notice was deemed appropriate given the suppression of facts and willful intent to evade tax. The appeal was dismissed in its entirety.

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