2019 (1) TMI 1039 - AT - Service Tax

Penalty u/s 77 and 78 of FA - non-payment/short payment of service tax - the appellant had got itself registered and paid service tax with interest and late fee - Held that - Essentially, it implies that the Revenue should have reasons before alleging fraud, suppression etc. and secondly, the provisions of Section 78 stand controlled by Section 80 of the Finance Act, 1994, ibid. This makes that for every default, penalties under Section 77 and 78 are not automatic. In the case on hand, much before the issuance of show cause notice the assessee has got itself registered, paid the taxes along with applicable interest and this also is established by the fact that the same is appropriated in the Order-in-Original - In the SCN as well as the orders of the lower authorities, the Revenue has but for reiterating the wordings in the Sections itself, has not gone beyond that to put on record any reasons on the alleged malafides, fraud or suppression, etc. - penalty not warranted - appeal allowed - decided in favor of appellant.

Summary

Issues:
Challenge to penalty under Section 77 and 78 of the Finance Act, 1994 for non-submission of service tax return electronically and delayed filing.

Analysis:
The dispute in this case pertains to the period from 01.01.2013 to 30.09.2013, where the appellant contested the penalty imposed by the adjudicating authority and upheld by the Commissioner GST & CE (Appeals) under Section 77 and 78 of the Finance Act, 1994. The appellant challenged the penalties related to the non-submission of service tax return electronically for the period 01.01.2013 to 31.03.2013 and the delayed submission for the period 01.04.2013 to 30.09.2013, where the appellant voluntarily submitted the return with a delay of 180 days and paid the late filing fee. The appellant argued that penal action for non-submission was unwarranted as they had paid the entire service tax along with interest before receiving the show cause notice, and there was no allegation of any service tax evasion. The appellant also contended that they voluntarily paid penalties in addition to tax, interest, and late fee, demonstrating their bona fide actions.

The appellant relied on various Tribunal rulings to support their argument for setting aside the penalty under Section 78. On the other hand, the department argued that the appellant's payment and compliance only occurred after the initiation of the investigation, justifying penal action for non-compliance with the provisions of the Finance Act. The department asserted that the allegation of suppression of facts made the appellant liable for penalties under Section 77 (2) and 78 of the Act.

Upon careful consideration of the arguments and relevant legal provisions, the Member (Judicial) analyzed the case. Section 77 deals with penalties for contravention of rules and provisions of the Act without specified penalties, while Section 78 covers failure to pay service tax and instances of fraud or suppression. It was noted that penalties under Sections 77 and 78 are not automatic for every default, and Section 80 of the Finance Act controls these provisions. In this case, the appellant had registered, paid taxes with interest before the show cause notice, and the Revenue failed to provide reasons or evidence of fraud or suppression beyond reiterating statutory language. Consequently, the Member (Judicial) concluded that the penalties imposed could not be sustained, setting aside the impugned order confirming the penalty and directing the deletion of penalties, thereby allowing the appeal.

In summary, the judgment revolved around the challenge to penalties imposed under Section 77 and 78 of the Finance Act, 1994 for non-submission of service tax return electronically and delayed filing. The analysis focused on the appellant's compliance, the department's allegations, relevant legal provisions, and ultimately, the decision to set aside the penalties based on lack of evidence supporting fraud or suppression, leading to the allowance of the appeal.