2018 (5) TMI 558 - AT - Service Tax

Penalty u/s 77 and 78 of the Finance Act, 1994 - service tax along with interest paid much before the issue of SCN and there was no deliberate intention to evade tax, therefore, no penalty should be imposed on them - Held that - the appellant has collected the service tax but failed to deposit the same in the Government Treasury. No doubt, the appellant has paid the service tax along with interest when the department issued the summons to the appellant. Penalty imposed under Section 77(2) is concerned, the appellant has produced the return which was filed belatedly by him along with penalty of ₹ 2,000/-. Since the returns have been filed with the penalty, therefore, there is no justification for imposing penalty under Section 77(2) of the Act. Penalty imposed under Section 78 - Held that - in the present case, the Assistant Commissioner has imposed equal penalty under Section 78 of the Finance Act, 1994 and has not afforded an opportunity to pay 25% of Service Tax as penalty within a period of 30 days as per the proviso to Section 78 as applicable during the relevant time - in view of the fact that there was no inordinate delay in payment of service tax along with interest by the assesse, the ends of justice will be met, if the appellant is directed to pay 25% of Service Tax as penalty. Appeal allowed - decided in favor of appellant.

Summary

Issues: Appeal against rejection of appeal by Commissioner (A) for non-payment of service tax and penalties under Sections 77 and 78 of the Finance Act, 1994.

Analysis:
1. Background: The appellant, engaged in assaying of gold ornaments, held centralized Service Tax registration but failed to register newly added branches and did not pay service tax for April 2010 to November 2010. Show-cause notice was issued, resulting in penalties under Sections 77 and 78.

2. Appellant's Arguments: The appellant contended they paid service tax with interest before the notice, had no intent to evade tax, and had a history of timely payments and returns. Cited judicial precedents to support their case.

3. Respondent's Defense: The respondent argued the appellant collected but did not deposit service tax, indicating suppression and intention to evade tax. Emphasized the delay in depositing tax and cited relevant case laws to support their stance.

4. Judgment: The tribunal found the appellant collected but did not deposit service tax, justifying penalties. However, considering the appellant's timely filing of returns with penalties and lack of inordinate delay in payment, reduced the penalty to 25% of the service tax amount. Directed the appellant to pay the reduced penalty within one month, failing which the full penalty under Section 78 would apply.

5. Conclusion: The appeal was dismissed, except for the reduction of penalty to 25% of the service tax amount if paid within one month. The penalty under Section 77(2) was set aside, emphasizing the importance of timely tax payments and penalties as per the law.