2017 (6) TMI 945 - AT - Service Tax

Outdoor Catering Services - demand of tax u/s 73 with interest u/s 75 and penalty u/s 78 of the Act - Held that - the appellant has paid the entire dues along with interest and he has also submitted that on account of recession he had to close down his business and further he has not collected the service tax from his customers and the delay happened on account of non-recovery of dues from his customers - ends of justice would be met if the appellant is directed to pay 25% of the penalty amount which would come to 2, 39, 243/- - demand of tax with interest upheld - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Appeal against Order-in-Original dismissed by Commissioner (A)
- Appellant's claim of financial difficulties leading to closure of business
- Appellant's contention on payment of substantial amount before show-cause notice
- Appellant's argument on non-collection of service tax from customers
- Appellant's plea for benefit under Section 80 of the Act
- Appellant's claim of entitlement to 25% penalty benefit under Section 78 of the Act

Analysis:
1. Appeal Dismissal by Commissioner (A):
The appellant filed an appeal against the Order-in-Original before the Commissioner (A), who dismissed the appeal on 29.3.2013. The appellant challenged this decision, leading to the present appeal.

2. Financial Difficulties and Business Closure:
The appellant cited financial crisis due to global economic recession as the reason for the closure of their business in June 2011. They emphasized that this situation led to difficulties in paying the service tax on time as they were unable to collect the amount from their customers.

3. Payment Before Show-Cause Notice:
The appellant argued that they had paid a substantial amount well before the issuance of the show-cause notice. They contended that the department should not have proceeded with the notice after they had already made payments.

4. Non-Collection of Service Tax from Customers:
The appellant maintained that they did not collect the service tax from their customers, M/s. Wipro Sales and M/s. BTC, which contributed to the delay in payment. They provided a declaration to support this claim.

5. Benefit Under Section 80 of the Act:
The appellant asserted their entitlement to the benefit of Section 80 of the Act, which states that no penalty is applicable if the assessee proves a reasonable cause for any failure. In this case, the reasonable cause was the financial difficulties leading to business closure.

6. Entitlement to 25% Penalty Benefit Under Section 78 of the Act:
The appellant argued that they should have been given the benefit of paying only 25% of the penalty amount as per Section 78 of the Act. They referenced specific legal decisions to support their claim.

In the final judgment, the Tribunal considered the submissions from both parties and noted that the appellant had paid the entire dues along with interest. Recognizing the impact of the recession on the appellant's business and their failure to collect service tax from customers, the Tribunal directed the appellant to pay 25% of the penalty amount, totaling &8377; 2,39,243. This decision aligned with the appellant's argument and legal references provided, concluding the appeal in favor of the appellant.