2017 (2) TMI 386 - AT - Service Tax

Imposition of penalty u/s 76 and 78 of the FA, 1994 - appellant s claim that on the demise of managing director of the company, filing the ST-3 Returns and discharge of Tax could not be complied on the schedule time as prescribed - whether imposition of penalty justified? - Held that - I do not see any intention by way of suppression or mis-statement of facts resulting into non payment of service tax in time by the appellant. Therefore, penalty u/s 78 is unwarranted and unsustainable of law. However, it is also not contradicted that the amount has been collected from their customers but not paid to the Govt. in time. Thus, penalty u/s 76 is attracted. Appeal disposed off - decided partly in favor of assessee.

Summary

Issues:
Appeal against imposition of penalty under Section 76 and 78 of the Finance Act, 1994 for failure to discharge service tax and file service tax returns during a specific period.

Analysis:
The appellant failed to pay service tax and file returns from April 2006 to September 2007, leading to a show cause notice for recovery of ?21,66,234 and penalty under Section 76 and 78 of the Finance Act, 1994. The Commissioner (Appeals) confirmed the demand and penalty, prompting the appellant to appeal against the penalties imposed.

The appellant's advocate argued that due to the managing director's demise, they couldn't comply with tax obligations on time. The entire service tax amount with interest was paid subsequently, and no penalty under Section 76 or 78 should be imposed. The advocate also cited a judgment by the Gujarat High Court to support the argument against simultaneous penalties under both sections.

On the other hand, the Revenue's representative highlighted that despite being registered, the appellant failed to pay service tax and file ST-3 returns, justifying the penalties. Referring to various judgments, the representative argued against waiving penalties, citing the appellant's previous unsuccessful plea for invoking Section 80 of the Finance Act, 1994.

After hearing both sides and examining the records, the Tribunal acknowledged the appellant's default but noted that the entire tax amount with interest was paid later, attributing the delay to the managing director's death. While penalty under Section 78 was deemed unwarranted due to lack of intention for non-payment, penalty under Section 76 was upheld as the amount was collected from customers but not paid to the government on time. The Tribunal referred to a previous order in the appellant's case for a different period to support this decision. Consequently, the penalty under Section 76 was maintained, while the penalty under Section 78 was set aside, partially allowing the appeal.