2019 (1) TMI 1235 - AT - Service Tax

Imposition of penalty - Late payment of service tax - Supply of Tangible Goods Service - appellants have pointed out that the delay in discharging service tax liability was only due to Poompurhar disputing the applicability of service tax on the grounds that they were a government owned company - Held that - SCN mentions that though the assessee obtained service tax registration on 11.7.2008 and had raised invoices on service receiver by charging service tax separately, however they did not pay service tax liability. From perusal of the correspondence submitted by appellant between them and Poompuhar clearly shows to indicate that there was considerable resistance from the latter for paying up the service tax component of the invoices raised by the appellant. It was only vide their letter dt. 25.03.2009 that Poompuhar, finally agreed to process and release service tax payments w.e.f. 16.05.2008 on certain conditions. However, there was still further correspondence on this very dispute even till April 2009. There is reasonable cause for appellant in their failure to discharge tax liability when it was due. In any case, the amount of ₹ 7 crores appropriated by the adjudicating authority is more enough to cover the interest liability that would accrue due to late payment - appellants are entitled to get waiver from penalty under Section 80 ibid - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Imposition of penalty under Section 78 of the Finance Act, 1994.

Comprehensive Analysis:
The case involved a dispute regarding the imposition of a penalty under Section 78 of the Finance Act, 1994. The appellant had provided two ships on a time charter basis to a company for transhipping coals, which was deemed a taxable service under the category of "Supply of Tangible Goods Service." The department issued a show cause notice proposing a demand for service tax liability along with penalties. The adjudicating authority confirmed the payment of service tax with interest and imposed a penalty under Section 78 of the Finance Act, 1994. The appellant contested the penalty imposition through an appeal.

The appellant argued that the delay in payment of service tax was due to the service recipient initially disputing the applicability of service tax, which led to resistance in paying the tax component. The appellant highlighted that they paid the tax liability once the service recipient agreed to pay, covering the outstanding amount and subsequent liabilities. The appellant also contended that they were entitled to the benefit of Section 80 of the Finance Act, 1994, as the delay was not their fault and all payments were made promptly upon resolution with the service recipient.

Upon examination of the facts and correspondence between the parties, the Tribunal found that the delay in discharging the service tax liability was primarily due to the service recipient's resistance and disputes regarding the tax applicability. The Tribunal noted that the appellant promptly paid the tax liability once resolved with the service recipient, covering all outstanding amounts. Considering the circumstances, the Tribunal concluded that there was a reasonable cause for the appellant's failure to discharge the tax liability on time. As a result, the Tribunal set aside the penalty imposed under Section 78 of the Finance Act, 1994, and allowed the appeal in this regard, granting the appellant waiver from the penalty under Section 80 of the Act.

In summary, the Tribunal ruled in favor of the appellant, acknowledging the circumstances leading to the delay in tax payment and granting relief from the penalty imposed under Section 78 of the Finance Act, 1994, based on the appellant's entitlement to waiver under Section 80 of the Act.