2014 (12) TMI 328 - AT - Service Tax

Levy of Penalty u/s 76 and 78 - short payment of service tax - Held that - As regards penalty u/s. 78 of the Finance Act, 1994, according to Sec. 73 of the Finance Act, when shortfall of payment occurs because of suppression/mis-declaration if the assessee paid the amount with interest and 25% of the tax towards penalty before issuance of show cause notice, further proceedings need not be initiated. In this case, but for the investigation taken up by the Revenue, appellant would not have paid the amount of service tax as has been demanded. On the Outdoor Caterer service, the appellant has not paid service tax at all and the appellant had also not paid the correct amount of service tax on the consideration received for the services rendered by them over a few years. In such a situation, penalty u/s. 78 is imposable and has been correctly imposed. Coming to penalty u/s. 76 of the Finance Act, 1994, there are decisions taking a view that penalties are imposable u/s. 76 & 78 of the Finance Act, 1994 prior to April, 2008 when Section 78 was amended to provide for no penalty u/s. 76 when penalty has been imposed u/s. 78. However, in this case, taking note of the fact that total amount short-paid is less than ₹ 50,000/- and it has occurred for a period of three financial years and obviously the appellant is not a big service provider. Moreover, as soon as the omission was pointed out, the appellant paid the service tax with interest. Further, it is also found that the appellant had correctly calculated the service tax payable by them with interest. The action of the assessee for verification of records before initiation of the proceedings would show that the omission could have occurred due to ignorance/improper accounting. Therefore, I find that it can be said that the appellant has shown reasonable cause for non-imposition of penalty u/s. 76 of the Finance Act, 1994 - Decided partly in favour of assessee.

Issues Involved:
1. Short payment of service tax under different categories.
2. Application of abatement under Notification No. 1/2006-S.T.
3. Imposition of penalties under Sections 76 and 78 of the Finance Act, 1994.
4. Treatment of amount received as cum-tax receipt.
5. Dispute regarding imposition of penalties.

Analysis:

1. Short Payment of Service Tax:
The appellants were found to have short-paid service tax amounts totaling to &8377; 86,440/- for the years 2004-05, 2006-07, and 2007-08. Additionally, they failed to pay service tax on income received under the category of 'Outdoor Caterer' service, resulting in a further short payment of &8377; 28,397/-. The adjudicating authority confirmed the service tax liabilities and penalties under Sections 76 and 78 of the Finance Act, 1994.

2. Application of Abatement:
The abatement granted under Notification No. 1/2006-S.T. was found to be conditional, and as the appellants did not fulfill the conditions, the abatement could not be granted to them. This non-compliance further contributed to the short payment of service tax and subsequent penalties.

3. Imposition of Penalties:
The appellants contested the imposition of penalties under Sections 76 and 78, arguing that they had paid the entire service tax amount with interest before the issuance of the show cause notice. The Assistant Commissioner upheld the penalties citing suppression of facts and mis-declaration. However, the Tribunal analyzed the circumstances and found that while penalty under Section 78 was justified due to non-payment of service tax on 'Outdoor Caterer' service, the penalty under Section 76 was set aside considering the appellant's prompt payment and reasonable cause for the omission.

4. Treatment of Amount Received:
The Commissioner (A) considered the treatment of the amount received as cum-tax receipt, which led to a reduction in the total demand to &8377; 49,110/-. The appellants appealed against this order, contesting the demand, interest, and penalties imposed under Sections 76 and 78 of the Finance Act, 1994.

5. Dispute Regarding Penalties:
The Tribunal deliberated on the imposition of penalties under Sections 76 and 78, emphasizing the significance of timely payment, suppression of facts, and the appellant's compliance with service tax regulations. Ultimately, the penalty under Section 76 was set aside based on the appellant's reasonable cause for the underpayment, while the penalty under Section 78 was upheld due to non-payment and mis-declaration issues.

In conclusion, the Tribunal's judgment addressed the various issues related to short payment of service tax, application of abatement, imposition of penalties, treatment of received amounts, and the dispute over penalties. The decision provided a nuanced analysis of the facts and legal provisions, ultimately resulting in the setting aside of one penalty while upholding another based on the specific circumstances of the case.

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