2014 (8) TMI 148 - AT - Service Tax

Penalty under Sections 77 and 78 - delayed payment of service tax - Dry cleaning service - Held that - While it is admitted that in the order portion the original adjudicating authority has referred to section 80 for not imposing penalty under Section 76, on holistic reading of order-in-original as well as order-in-appeal it is abundantly clear that having imposed penalty under Section 78, penalty under Section 76 was not imposed as it would tantamount to imposing double penalty. There is even a whisper to the effect that Section 80 ibid has even been considered for the purpose of not imposing penalty under Section 76. Thus, a mere mention of Section 80 in the order portion is nothing more than an inadvertence of no consequence. Reasons for delayed payment of service tax - Held that - The statutory levies cannot be obviated for so long merely because the computer was down. Further, even if the computer was down, the appellant could have filed the return manually and paid service tax by computing the same manually. Further even if their untenable argument is considered for a moment, being aware that they had not paid service tax due and not filed statutory ST-3 returns for so long, if their bonafides were above board, they should/ would have atleast informed the department about it. It was only when the raid was conducted and they were caught, that they admitted their violations. It is pertinent to note that the appellants have not claimed that they were not aware of their liability. Thus the ingredients for invoking the provisions of Section 78 are conspicuously present in this case and penalty of ₹ 1000/- imposed under Section 77 is also obviously imposable - Decided against assessee.

Summary

Issues:
Appeal against penalty under Sections 77 and 78 of the Finance Act, 1994 for non-payment of service tax and failure to file ST-3 returns.

Analysis:
The case involved an appeal against the imposition of penalties under Sections 77 and 78 of the Finance Act, 1994. The appellants, who provided dry cleaning services, were found to have not filed any ST-3 return up to September 2005 and had not paid any service tax from April 2004 to December 2005. A show cause notice was issued, and the adjudicating authority confirmed the demand along with interest and penalties under Sections 77 and 78 but did not impose a penalty under Section 76. The Order-in-Appeal upheld this decision.

The appellants argued that they were registered with the Central Excise Department since 2002 but could not file ST-3 returns or pay service tax due to computer issues. They claimed that penalty under Section 76 was waived by the original adjudicating authority under Section 80 of the Finance Act, 1994. The Departmental Representative contended that the appellants were aware of their tax liability, and the length of the period involved made the computer issue excuse untenable. It was noted that penalty under Section 76 was not imposed to avoid double penalty due to the penalty under Section 78.

The judge considered both sides' submissions and found that penalty under Section 76 was not imposed to avoid double penalty, not due to Section 80. The excuse of the computer being down for not paying service tax over a long period was deemed unacceptable. The judge highlighted that even if the computer was down, manual filing of returns and payment of taxes was possible. The appellants' failure to inform the department about their non-compliance until caught during a raid indicated lack of bonafide intentions. The judge concluded that the penalties under Sections 77 and 78 were rightly imposed, considering the appellants' awareness of their tax liability. The appeal was dismissed, upholding the impugned order.