2017 (6) TMI 227 - AT - Service Tax

Penalty u/s 78 - Maintenance and repair services - Failure to discharge service tax - failure to file ST-3 returns - case of appellant is that they had deposited the service tax dues and the delay is purely due to liquidity crunch - Held that - the appellant has collected the service tax and did not deposit the same to the Government Treasury which shows that he has an intention to evade service tax - penalty upheld - decided against appellant.

Summary

Issues:
Appeal against rejection of appeal by Commissioner (A), imposition of penalties under Section 77 and Section 78 of the Finance Act, non-payment of service tax, intention to evade service tax, benefit of reduced penalty, authority to extend reduced penalty.

Analysis:

1. Appeal Rejection by Commissioner (A):
The appellant, a maintenance and repair services provider, appealed against the rejection of their appeal by the Commissioner (A). The Department observed non-payment of service tax despite collecting it from customers. The appellant argued that they faced liquidity crunch leading to the delay. The Commissioner (A) upheld the original authority's decision, prompting the appellant to appeal.

2. Imposition of Penalties under Section 77 and Section 78:
The original authority confirmed a demand for service tax, Education Cess, and SHE Cess with interest and penalties under Sections 77 and 78 of the Finance Act. The appellant contended that they paid the service tax along with interest and penalty under Section 77, and the delay was not willful. The appellant challenged the imposition of penalty under Section 78, citing financial hardships and non-willful non-payment.

3. Intention to Evade Service Tax:
The AR argued that the appellant's collection of service tax without payment indicated an intention to evade tax. The appellant, however, maintained that the delay was due to financial constraints and not willful evasion. The Tribunal considered precedents and upheld the imposition of penalties under Section 78 based on the non-payment despite collection.

4. Benefit of Reduced Penalty:
The appellant sought the benefit of reduced penalty equivalent to 25% as per the proviso to Section 78(1) of the Act. The AR contended that this benefit could only be granted by the adjudicating authority, not the appellate body. The Tribunal, relying on relevant decisions, agreed with the AR, denying the appellant the benefit of reduced penalty.

5. Authority to Extend Reduced Penalty:
The AR argued that the benefit of reduced penalty could only be extended by the adjudicating authority, citing various decisions in support. The Tribunal concurred with this argument, emphasizing that the appellate authorities did not have the jurisdiction to grant the benefit of reduced penalty.

In conclusion, the Tribunal upheld the impugned order, dismissing the appeal based on the appellant's collection of service tax without depositing it, indicating an intention to evade tax. The Tribunal relied on precedents and denied the appellant the benefit of reduced penalty, stating that such benefits could only be granted by the adjudicating authority.