2018 (10) TMI 29 - AT - Service Tax

Manpower Recruitment or Supply Agency's Service - default in discharging service tax liability - default for the month of May' 2008, June 2008 and July 2008 - the appellant also did not file the returns within the stipulated time - Held that - It is admitted fact that the appellant has been defaulting in discharge of service tax and in filing of statutory returns right from the October' 2002 and this pattern of default of payment of tax continued even in the month of May' 2008 onwards. The appellant are not disputing the duty amounts and the interest amounts payable thereon. Hence, the demands of duty and interest in all the three appeals, being uncontested by the appellant are upheld. Penalty u/s 76 of FA, 1994 - invocation of section 80 - Held that - Admittedly, the appellant has made it a pattern to delay the payment of service tax month after month since October 2002. Further, it is not disputed that the appellant has been recovering service tax from their clients but not depositing the same immediately. Appellants were fully aware of their liability and their obligation to pay service tax in time. However, on the ground of so-called of financial crunch, they have delayed the payment of service tax - In the present appeals, however, the appellant admittedly did not pay the service tax and interest before the issuance of show cause notice. The appellants have not been able to substantiate their claim for waiver of penalty imposed under Section 76 of the Act. Therefore, their plea for waiver of the penalty by exercising discretion under Section 80 of the Act is liable to be rejected. Benefit of the 2011 amendment in Section 76 ibid - the only reason given by the appellant is that since the 2011 amendment was by way of substitution, the same should be applied retrospectively - Held that - In the Finance Act, 2011 which brought about the amendments in Section 76 of the Finance Act, 1994, there is nothing in the amendment which says that the amendment is to be applied retrospectively - In the present case, the amendments made are neither clarificatory in character nor for correcting any obvious mistake. The changes brought about by the 2011 amendment in Section 76 ibid in respect of the amount of penalty (from ₹ 200 to ₹ 100) or percentage based penalty (from 2% to 1%) to be imposed are not to rectify any mistake or to clarify any ambiguity - the said amendment is to apply prospectively only - penalties upheld. Appeal dismissed - decided against appellant.

Summary

Issues:
Appeal against penalty under Section 76 of the Finance Act, 1994 for delayed payment of service tax.

Analysis:
1. Background: The appellant, engaged in providing taxable services, failed to discharge service tax liability for May, June, and July 2008. Demands were issued for recovery of tax, interest, and penalty under Section 76 of the Finance Act, 1994.

2. Appellant's Arguments: The appellant cited severe cash flow problems due to delayed payments from clients as the reason for late service tax payment. They requested waiver of penalty under Section 80 and referred to relevant case laws supporting their stance.

3. Revenue's Stand: The revenue contended that the appellant repeatedly delayed service tax payments knowingly, with no grounds for penalty waiver. They relied on tribunal judgments supporting their position.

4. Judicial Findings: The tribunal noted the appellant's consistent default in tax payments since 2002, even after recovering service tax from clients. The appellant's reasons for delayed payments were deemed insufficient, and their plea for penalty waiver was rejected.

5. Penalty Imposition: The tribunal upheld the penalties imposed under Section 76, emphasizing the appellant's awareness of their tax obligations and deliberate delay in payment. The tribunal differentiated the present case from precedents where penalties were not justified due to timely tax payment.

6. Retrospective Application: The appellant's plea for retrospective application of the 2011 amendment in Section 76 was dismissed. The tribunal clarified that the amendment was substantive, not clarificatory, and thus applied prospectively.

7. Final Verdict: The tribunal found no infirmity in the adjudicating authority's order and upheld the penalties imposed. Consequently, the appeals filed by the appellants were dismissed on 10/08/2018.