2018 (7) TMI 1126 - AT - Service Tax

Delay in payment of service tax - Services of recovery agent to M/s. ICICI Bank Ltd. - Appellant is collecting dues from the borrowers of ICICI Bank Ltd. and to take possession of the assets from the borrowers of the bank - Demand of interest for delay in payment of Service tax and levy of penalty - Held that - It is not disputed that the appellant has paid the entire service tax before the adjudication order on 31/05/2011 - here is no suppression of facts with intent to evade payment of tax because after taking the registration, the appellant started paying service tax. The appellant has submitted that there was delay in payment of service tax because the service recipient refused to make payment towards service tax in spite of repeated demand - A penalty will ordinarily be imposed in cases where the party acts deliberately in defiance of law, or is guilty of contumacious or dishonest conduct or acts in a conscious disregard of its obligation, but not in cases where there is a technical or venal breach of the provisions of the Act or where the breach flows from a bonafide belief that the offender is not liable to act in the matter prescribed by the statute. The penalty is not imposable since the appellant had a reasonable cause which resulted in failure on the part of the appellant to pay the service tax in time, by invoking section 80, penalty is set aside - But since there is a delay in payment of service tax, the appellant is liable to pay the interest on the delayed payment which will be quantified by the original authority after considering the facts - matter is remanded for the purpose of this quantification. Appeal allowed in part.

Summary

Issues:
Appeal against penalties under Section 78 - Suppression of value of taxable service, delay in payment of service tax, late filing of ST3 returns.

Analysis:

1. Suppression of Value of Taxable Service:
The appellant, engaged in providing recovery agent services to a bank, faced penalties under Sections 75, 76, and 78 for alleged suppression of taxable value. The appellant argued that no material fact was suppressed, as they had promptly registered, paid taxes, and provided all details to the Department. The Commissioner (Appeals) reduced the penalty under Section 78, considering the amount paid before the show-cause notice. The Tribunal found no intent to evade tax, as the appellant paid the entire tax before adjudication. Citing legal precedents like Hindustan Steel Ltd., the Tribunal held that penalties should not apply when there is no deliberate defiance of law or dishonest conduct.

2. Delay in Payment of Service Tax:
The appellant acknowledged delays in tax payments, attributing them to financial crises and the bank's refusal to pay service tax despite collections. The Tribunal noted that the appellant paid the full tax before adjudication, emphasizing that penalties under Section 78 were unwarranted due to reasonable causes for the delays. Quoting Easland Combines, the Tribunal highlighted that mere failure to pay tax, without fraud or suppression, does not justify extended limitations for penalties.

3. Late Filing of ST3 Returns:
The case involved late filing of ST3 returns, leading to penalties under Section 78. The appellant's argument centered on the absence of deliberate suppression or evasion, supported by timely tax payments and cooperation with the Department. Relying on legal principles, the Tribunal waived the penalties under Section 78, emphasizing the appellant's liability for interest on delayed tax payments.

In conclusion, the Tribunal disposed of the appeals by dropping penalties under Section 78, holding the appellant liable for interest on delayed tax payments. The judgment emphasized the importance of reasonable causes for delays and the absence of fraudulent intent in tax matters.