2017 (2) TMI 491 - AT - Service Tax

Imposition of penalty u/s 78 and 70 of the FA, 1994 - late filing of return - Held that - the appellant has discharged the reduced penalty of 25% within one month of passing of the Order-in-Original - the appellant is eligible for reduced penalty of 25% of the service tax demand. Delay in filing 6 ST-3 returns - appellant liable to pay penalty for 6 delays. The equal amount of penalty imposed u/s 78 is set aside. The impugned order is modified to the extent of setting aside the equal amount of penalty and is modified by giving benefit of paying reduced penalty of 25% of the service tax demand, without disturbing the confirmation of service tax and the interest thereon - appeal disposed off - decided partly in favor of appellant.

Summary

Issues:
Challenge to imposition of penalty under section 78 and section 70 of the Finance Act, 1994.

Analysis:
The appellant contested the penalty imposed under section 78 of the Finance Act and the penalty for late filing of returns under section 70. The Commissioner (Appeals) upheld the confirmation of service tax but set aside the penalty under section 77(2) of the Finance Act. The appellant argued that they had paid the service tax liability, interest, and a portion of the penalty before the Order-in-Original. They claimed they were entitled to a reduced penalty of 25% of the service tax demand, which was not offered by the adjudicating authority or the Commissioner (Appeals). The appellant requested a waiver of the equal amount of penalty imposed. The appellant also disputed the late fee imposed under section 70, stating that only 3 ST-3 returns were filed late, while the department alleged 6 returns were delayed.

The Tribunal noted that the appellant had not been given the option of reduced penalty as provided under section 78. The appellant had paid a portion of the penalty before the Order-in-Original and had paid the reduced penalty of 25% within a month of the order. Citing precedents, the Tribunal held that the equal amount of penalty imposed was unjustified and set it aside. However, regarding the late fee under section 70, the Tribunal found the department's argument more convincing. Despite the appellant's claim of only 3 delayed returns, the Tribunal upheld the late fee for 6 delayed returns and ordered the appellant to pay the balance of ?6,000.

In conclusion, the Tribunal set aside the equal amount of penalty under section 78, granting the benefit of paying the reduced penalty of 25% of the service tax demand. The confirmation of service tax and interest was maintained. The penalty under section 70 was upheld, and the appellant was directed to pay the balance of ?6,000 under that section. The appeal was partly allowed with the mentioned modifications and consequential reliefs, if any.