2018 (10) TMI 546 - AT - Service Tax

Non-deposit of the service tax collected by appellant from their customers - Advertising services - demand of tax with Interest and penalties - Held that - The appellant had not disputed the factual matrix that they had in fact charged and collected the service tax liability for the period in question form their customers. Despite collecting such an amount from their customers, appellant did not deposit the same in to the Govt Treasury. Subsequently they deposited the said amount. We find from the records that it is not very clear as to whether the appellant has deposited the entire amount to day also - the appellant had not even filed the monthly returns indicating the service tax liability to the departmental authorities and the amounts collected by them during the course of business - demand upheld. Simultaneous penalties under Section 76 & 78 of FA - Held that - These arguments will not carry the case of the appellant any further as it is seen from the records that show-cause notices were issued on 20.04.2007 and before the insertion of provisions of Section 78 of the Finance Act 1992 which indicated non-imposition of simultaneous penalties. Invocation of Section 73 A of the Finance Act 1994 - Held that - Provisions of Section 73 A would be attracted only when the amounts collected by the assessee is in excess of the tax which is deposited or to be deposited in the Govt Treasury indicating them as tax in the invoices - In the case in hand, appellant had charged the applicable rate of tax, collected the same, hence, provisions of Section 73 for the demand of non-payment of tax was correctly invoked. Appeal dismissed - decided against appellant.

Issues:
1. Non-deposit of service tax collected by the appellant from customers.
2. Applicability of Section 73 vs. Section 73 A of the Finance Act 1994.
3. Time-barred show-cause notice.
4. Financial constraints as a defense for non-payment of tax liability.
5. Imposition of penalties under Sections 76, 77, and 78 of the Finance Act 1994.

Issue 1: Non-deposit of service tax collected by the appellant
The appellant, an advertising agency, collected service tax from customers but failed to deposit it with the government. Despite admitting to collecting the tax, they did not remit it to the Govt Treasury. The records indicated uncertainty regarding whether the full amount had been deposited even subsequently. The appellant also did not file monthly returns to disclose the tax liability and collections. Both lower authorities correctly imposed tax liability, interest, and penalties due to the non-deposit of collected service tax.

Issue 2: Applicability of Section 73 vs. Section 73 A of the Finance Act 1994
The appellant argued that Section 73 A should have been invoked instead of Section 73 for demanding the tax. However, the show-cause notice clearly stated that the tax collected was not paid to the Govt Treasury, justifying the use of Section 73. Section 73 A applies when the collected amount exceeds the tax to be deposited. Since the appellant collected and charged the applicable tax rate but failed to remit it, Section 73 was correctly applied.

Issue 3: Time-barred show-cause notice
The appellant claimed the show-cause notice was time-barred and hit by limitation. However, the notice was issued before the insertion of Section 78 of the Finance Act 1992, which prevented simultaneous penalties. Thus, the timing of the notice was deemed appropriate.

Issue 4: Financial constraints as a defense
The appellant cited financial problems for not discharging the tax liability promptly. While seeking leniency, they assured readiness to pay subsequently. However, financial constraints were not accepted as a valid defense for non-payment of tax liability by the authorities.

Issue 5: Imposition of penalties under Sections 76, 77, and 78
The appellant argued against the imposition of simultaneous penalties under Sections 76 and 78. The records showed that show-cause notices were issued before Section 78 was inserted, justifying the penalties imposed. The arguments against the penalties were deemed insufficient, and the penalties were upheld.

In conclusion, the appellate tribunal upheld the lower authorities' decision, confirming the tax liability, interest, and penalties imposed on the appellant for failing to deposit the service tax collected from customers. The appeal was rejected, and the impugned order was deemed correct and legal, requiring no interference.

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