2019 (2) TMI 599 - AT - Service Tax

Waiver of penalty u/s 78 of the Finance Act, 1994 - default in payment of service tax and filing of ST-3 returns - extended period of limitation - Held that - A perusal of the SCN reveals that the visit of revenue intelligence was in 14.08.2008 on which date even a statement of Sri.P.Balachander, one of the partners in the appellant firm, was recorded. It appears that his admissions in his statement are not retracted or even disputed, later on. Even otherwise, there is no dispute regarding the service rendered namely, the Event Management Services, nor is there any dispute that the appellant raised invoices including service tax and even collected the same - The service in question came into statute book effective from 16.08.2002 and the SCN reveals that the appellant failed to discharge tax liability from 01.04.2004 and not even filed its service tax (ST-3) returns from 01.04.2004 to 31.03.2009, the period covered under the SCN. Sufficient time was granted even after survey by the Revenue intelligence, even the ld. Commissioner in the impugned order-in-original has fairly tried getting clarifications from the appellant s sundry debtors on account of the appellant s failure to do so. Commissioner has also been fair in extending the cum-tax value benefit despite the above and only quantified the demand thereafter - In spite of all this, the appellant, as admitted even by the ld. Advocate, has not paid the differential duty of ₹ 38,88,360/- demanded, which doesn t show their bonafides. Appeal dismissed - decided against appellant.

Summary

Issues: Penalty under section 78 of the Finance Act, 1994.

Analysis:
1. The case involved a dispute regarding the imposition of a penalty under section 78 of the Finance Act, 1994. The appellants were engaged in providing Event Management Service and had defaulted in payment of service tax and filing of ST-3 returns for the period 2004-05 to 2008-09. The Commissioner imposed a penalty of &8377; 87,83,385/- under Section 78 of the Finance Act, 1994, which was challenged in the appeal.

2. The appellants contended that a significant amount of &8377; 3.24 crores had not been realized from their clients, but the Commissioner, after verification with four customers, concluded that the entire amount had been paid to the appellants. The appellants argued that the demand of &8377; 38,67,980/- was raised without giving them an opportunity to defend effectively, rendering it unsustainable. However, they did not contest the total demand of &8377; 87,83,385/- and highlighted financial constraints for non-payment of service tax.

3. The Revenue authority argued that despite multiple opportunities, the appellants failed to substantiate their claim of non-realization of &8377; 3.24 crores. The authority also emphasized that the appellants did not file ST-3 returns for three years and failed to establish a reasonable cause for non-payment of service tax. The authority relied on legal precedents to support the imposition of penalties even if the duty and interest were voluntarily paid before the issuance of the show-cause notice.

4. The Tribunal considered the contentions of both parties and examined the facts of the case. It noted that the appellants did not dispute providing Event Management Services, issuing invoices with service tax, and collecting the same. The Tribunal found that the appellants failed to discharge tax liability from 01.04.2004 to 31.03.2009 and did not file ST-3 returns during this period. The Tribunal observed that the appellants' actions indicated a lack of bonafide intentions and upheld the penalty imposed under section 78 of the Finance Act, 1994.

5. The Tribunal concluded that the appellants did not demonstrate clean hands in their dealings and dismissed the appeal against the penalty imposed under section 78 of the Finance Act, 1994. The decision was pronounced in court on 12.02.2019.