2015 (7) TMI 968 - AT - Service Tax

Penalty u/s 76, 77 & 78 - non-payment of service tax due to financial hardship - Appellant is not contesting the Service Tax liability alongwith interest but are claiming waiver of penalty under Section 80 of Finance Act, 1994 - Cleaning services - Held that - The amount of Service Tax required to be paid for this period was more than ₹ 1 Crore. There is weight in the argument of the Appellant that due to payment of earlier dues, there was a financial difficulty in making the payment when the amounts received from the client for the year 2010-2011 and 2011-2012 were used for making the payments for the earlier Service Tax dues. The learned Chartered Accountant also brought to the notice of the Bench certain letters issued by the tax recovery officers of the Income Tax Department written directly to the clients of the Appellant that amounts due to M/s Aqua Master Clean should be directly paid to the Income Tax Department. Though these letters were issued after the period involved in these demands, but it gives an indication that there was a financial hardship on the part of the Appellant for not discharging the duty liability for the year 2010-2011 to 2011-2012 in time. Accordingly, it is held that there was a reasonable cause and the case of the Appellant is covered by the provisions of Section 80 of Finance Act, 1994 - Decided in favour of assessee.

Summary

Issues:
Service Tax liability, waiver of penalty under Section 80 of Finance Act, 1994, financial hardship due to past dues.

Analysis:

1. Service Tax Liability:
The Appellant, engaged in providing cleaning services, was required to pay Service Tax from 2006-2008 to 2011-2012. The Appellant acknowledged the liability and paid the entire amount along with interest before filing the appeals. The Appellant argued that the revenue generated in 2010-2011 and 2011-2012 was utilized to clear past dues, leading to financial difficulty in meeting the current Service Tax obligations.

2. Waiver of Penalty under Section 80:
The Appellant contested the penalty under Section 76 & 77 of the Finance Act, 1994, citing financial hardship due to significant past liabilities. The Department did not propose a penalty under Section 78, indicating no intention to evade payment of duty. The Appellant presented letters from the Income Tax Department directing clients to pay dues directly to them, showing financial strain. The Tribunal found a reasonable cause for the Appellant's failure to pay the Service Tax promptly and held that the case was covered by the provisions of Section 80 of the Finance Act, 1994.

3. Financial Hardship due to Past Dues:
The Appellant faced financial challenges due to substantial past liabilities, leading to delays in paying Service Tax for 2010-2011 and 2011-2012. The Tribunal considered the circumstances, including the utilization of revenue to clear earlier dues, as a valid reason for the delayed payments. The letters from the Income Tax Department further supported the Appellant's claim of financial hardship, ultimately resulting in the waiver of penalties under Section 80 of the Finance Act, 1994.

In conclusion, the Appellate Tribunal CESTAT Ahmedabad allowed the appeals filed by the Appellant, recognizing the financial hardship and reasonable cause for the delayed payment of Service Tax, and granted the waiver of penalties under Section 80 of the Finance Act, 1994.