2018 (11) TMI 1458 - AT - Service Tax

Penalty - Delayed payment of service tax - Management, Maintenance or Repair Service - It is the case of the assessee that they had to pay salary to their staff, PF, ESI and other statutory dues to their staff which created a huge cash flow problem and hence the service tax payment was delayed - Held that - An identical issue has been considered by CESTAT, Chennai in the case of M/s. Dusters Total Solutions Services Pvt. Ltd. Vs. CST, Chennai 2018 (9) TMI 825 - CESTAT CHENNAI , where it was held that the appellant has paid up the service tax belatedly before issuance of SCN. The interest which is in the nature of compensation for the delay in payment, was also paid after issuance of SCN and much before issuing the Order-in-Original. The conduct of the appellant in paying up service tax and interest, and the categoric finding of the Commissioner that there is no intention to evade tax, persuades us to hold that appellant has established reasonable cause for invoking Section 80 of the Act ibid. The penalty imposed is not proper and therefore by using discretion under Section 80 of the Finance Act, the same is set aside - demand with ineterst upheld - appeal allowed in part.

Summary

Issues involved:
Imposition of penalty under Section 76 & 78 of the Finance Act, 1994 for default in payment of service tax within due dates.

Detailed Analysis:

Issue 1: Imposition of penalty under Section 76 & 78
The appellant, engaged in Maintenance and Repair services, faced a Show Cause Notice for not depositing service tax of &8377; 1,06,47,157/- within due dates. The appellant argued that they paid the tax liability after being pointed out and before the Show Cause Notice was issued. The appellant cited a previous case where penalty was set aside under similar circumstances. The Revenue supported the lower authorities' findings and referred to another case to justify their stance.

Issue 2: Argument for waiver of penalty
The appellant contended that there was no mala fide intention or suppression of facts to evade tax payment. They highlighted that the tax liability was paid before the Show Cause Notice and prayed for a waiver of penalty. The appellant referenced a previous case where penalty was set aside, emphasizing that they paid the entire tax liability promptly after being informed.

Issue 3: Tribunal's decision and reasoning
After hearing both sides and reviewing the arguments and judgments cited, the Tribunal analyzed the situation. They referred to a previous ruling where penalty was set aside in a similar case. The Tribunal noted that the appellant had paid the service tax belatedly but before the issuance of the Show Cause Notice. Considering the circumstances and lack of intention to evade tax, the Tribunal invoked Section 80 of the Finance Act to set aside the penalty imposed under Section 78. The Tribunal partially allowed the appeal by modifying the impugned order to exclude the penalty under Section 78.

In conclusion, the Tribunal found that the penalty imposed under Section 78 was not justified given the circumstances and decided to set it aside using discretion under Section 80 of the Finance Act. The appeal was partially allowed based on the precedent and the lack of intention to evade tax payment.