2017 (12) TMI 1200 - AT - Service Tax

Penalty u/s 76, 77 and 78 - non-payment of service tax and non-declaration of the same - Held that - appellant were neither paying service tax correctly nor even declaring in the ST-3 returns - It is observed that if at all appellant had any bonafide intention, though they had not paid service tax in time, they could have very well declared taxable value in their ST-3 returns, they failed to do so, this clearly shows that appellant had pre-determined mind not to pay service tax hence suppressed of facts from the department. Only after detection of the department, appellant have come forward and paid service tax. Therefore intention to evade payment of service tax established. There is suppression of facts regarding non-payment of service tax with the department, therefore ingredient required for imposing penalties u/s 76, 77 and 78 indeed exist - penalty upheld - appeal dismissed - decided against appellant.

Summary

Issues:
Appellant challenging imposition of penalty under Section 76, 77, and 78 of the Finance Act, 1994.

Analysis:
The appellant, engaged in Manpower recruitment and Supply Agency Service, did not pay service tax on the supply of manpower and failed to file ST-3 returns. A show cause notice proposing a service tax demand of &8377;40,02,421 was issued, leading to an adjudication order confirming the demand and imposing penalties under Section 76, 77, and 78. The appellant appealed, claiming waiver of penalty under Section 80, citing financial constraints and lack of knowledge about service tax provisions. The Revenue argued that the penalties were justified due to deliberate evasion and suppression of facts by the appellant.

The Tribunal observed that the key issue was whether the appellant was liable for penalties under the specified sections. Despite the appellant's claims of lack of knowledge and financial difficulties, they neither paid service tax correctly nor declared it in ST-3 returns. The Tribunal noted the contradictory reasons given by the appellant for non-payment, indicating a pre-determined intention not to pay service tax and a suppression of facts. The adjudicating authority found that the appellant suppressed facts by not filing ST-3 returns and not obtaining service tax registration timely, establishing an intention to evade payment.

The Commissioner(Appeals) analyzed the penalty issue further, emphasizing the appellant's continued defiance of law by not filing any service tax returns and failing to disclose transactions. The Commissioner concluded that the appellant's unawareness of the law did not entitle relief under Section 80, given the lack of compliance even after becoming aware of legal obligations. The Commissioner also clarified the applicability of penalties under Section 76 and 78 based on the proviso to Section 78 and the timeline of the cause of action.

Both lower authorities found sufficient evidence of suppression of facts regarding nonpayment of service tax, justifying the penalties under Section 76, 77, and 78. Consequently, the appellant failed to establish a case for relief under Section 80, leading to the dismissal of the appeal and upholding of the impugned order. The judgment was pronounced on 29/11/2017.