2016 (1) TMI 923 - AT - Service Tax

Levy of penalty u/s 76 and 78 - waiver u/s 80 - delay in payment of service tax - earlier have not filed ST-3 returns and have not remitted the service tax collected from the customers to the Govt. exchequer - only after the investigation was started the Respondents started paying the service tax though belatedly. - Held that - There is enough reason to view the non-payment of service tax on due dates by the Respondents leniently. It is observed that the Respondents have paid almost the entire amount of service tax due before issuance of show cause notice. We also find that the legislature in its wisdom has also amended the provisions of Section 78, albeit from 01.4.2011, that the penalty under Section 78 may be reduced to 50% when true and complete details of the transactions are available in the specified records. In view of the same, we hold that the equivalent penalty imposed on the Respondents under Section 78 of the Finance Act, 1994, is to be reduced to 50% of the same in respect of the first show cause notice dated 30.08.2011, provided that the Respondents pay the said amount within thirty days from the receipt of this order. - Decided partly in favor of assessee.

Summary

Issues:
Appeal against penalties imposed under Sections 76 and 78 of the Finance Act, 1994.

Analysis:
1. The Respondent, a service provider under "Technical Testing and Analysis Services," was found to have not filed ST-3 returns and not remitted service tax collected from customers except for a small sum adjusted through cenvat credit. The adjudicating authority confirmed the demand of service tax and imposed penalties under Sections 76 and 78. The Commissioner (Appeals) upheld the demand but set aside the penalties. The Revenue appealed against this decision.

2. The Revenue argued that the Respondent owed a significant service tax liability for multiple years, which they had not fully paid. They contended that the non-payment was intentional, as the Respondent was aware of their obligations and had started paying only after investigation began. The Revenue emphasized that the penalties under Sections 76 and 78 were justified given the intentional non-compliance.

3. The Respondent did not contest the service tax liability but argued against the penalties, citing financial constraints that hindered their ability to pay. They highlighted outstanding payments from customers and asserted that there was no intention to evade tax, as the amounts were duly reflected in their accounts. They also pointed out that they had paid dues periodically and referred to a previous payment made before a show cause notice.

4. The Tribunal observed that the Respondent, being a registered service tax assessee, was aware of their responsibilities and procedures. Despite this, the Tribunal viewed the non-payment leniently due to the circumstances. Considering that most of the service tax was paid before the show cause notice and the amended provisions of Section 78 allowing for a reduced penalty, the Tribunal reduced the penalty under Section 78 to 50% for the first show cause notice.

5. Regarding the penalty under Section 76, the Tribunal noted that it was not imposable after a certain date as per the provisions. Citing a previous case, the Tribunal held that penalties under Sections 76 and 78 could not be imposed simultaneously if show cause notices were issued after the relevant amendment date. Consequently, the Tribunal upheld the Commissioner (Appeals)' decision to set aside the penalty under Section 76.

6. The impugned orders were upheld with modifications, allowing the Revenue's appeal on the specified terms.