2014 (9) TMI 214 - AT - Service Tax

Levy of penalty u/s 78 - suppression of facts - Held that - the appellant, undisputedly, provided clearing and forwarding agent s service to their clients during the period of dispute but did not file returns or pay service tax. They paid the tax only when investigations were launched by the Department. In his statement given under section 14 of the Central Excise Act, the manager of the appellant admitted tax liability and also admitted that they had not obtained registration with the Department in respect of the new premises to which they had shifted their business in July 2006. In such circumstances, there is no justification for opposing the penalties. In any case, the appellant has not sought the benefit of section 80 of the Finance Act, 1994 in this appeal. - payment of service tax prior to issue of show-cause notice is no ground to oppose the section 78 penalty - Decided against the assessee.

Summary

Issues:
Penalties imposed under sections 77 and 78 of the Finance Act, 1994.

Analysis:
The appeal was against penalties imposed under sections 77 and 78 of the Finance Act, 1994. The Department demanded a total amount from the assessee towards service tax and education cess for a specific period. The appellant contested the penal proposals, claiming non-filing of returns and non-payment of service tax were due to a bona fide mistake. The original authority imposed penalties under sections 76, 77, and 78. In the appeal, the Commissioner (Appeals) set aside the section 76 penalty but upheld the rest of the order. The appellant's challenge was solely against the penalties under sections 77 and 78. The appellant admitted tax liability but argued for the penalties to be excused due to a bona fide mistake, without providing a clear explanation for the mistake. The Department argued that the appellant admitted to suppression of facts with intent to evade payment of service tax, justifying the penalties under section 78.

The learned Superintendent pointed out that the appellant had not paid interest on tax and had requested a waiver of pre-deposit of penalty and interest due to insufficient funds. The Department alleged suppression of facts to evade payment of service tax, justifying the penalty under section 78. The appellant's admission of tax liability for the extended period implied acknowledgment of the suppression of facts, supporting the penalty imposition. The Department cited a Supreme Court ruling to argue that payment of duty before or after a show-cause notice does not alter penal liability under section 78, similar to section 11AC of the Central Excise Act.

The Tribunal found merit in the Department's arguments, noting the appellant's tacit concession to suppression of facts with intent to evade payment of service tax. The appellant had provided services but failed to file returns or pay service tax until after Department investigations. The manager admitted tax liability and lack of registration for new premises. The Tribunal agreed that payment of service tax before the show-cause notice did not negate the penalty under section 78, citing the Supreme Court ruling. As the appellant did not seek the benefit of section 80 of the Finance Act, the appeal was dismissed.