2019 (4) TMI 483 - AT - Service Tax

Imposition of penalty u/s 78 of FA - service tax alongwith interest before issue of SCN - bonafide financial hardship - Held that - Penalty on the allegation of deliberate delay and on the failure of the appellant is imposable u/s 76 of the Finance Act - Penalty u/s 78 is attracted in case of any short levy etc. on account of fraud, collusion, wilful mis-statement or suppression of facts including the contravention of the provisions of the Act or rules - such facts are not available in the facts of the present case - penalty set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Imposition of penalty under Section 78 of the Finance Act.

Analysis:
The appellant, a testing and research center providing Scientific & Technical Consultancy services, was inspected in September 2016, revealing unpaid service tax liabilities for specific periods. A show cause notice was issued in June 2017, demanding service tax payments and proposing penalties under Section 78 of the Act. The Assistant Commissioner confirmed the demand but did not impose the penalty under Section 78, citing bonafide financial hardship and prior tax payments. The Commissioner (Appeals) disagreed, emphasizing the mandatory nature of the penalty under Section 78 in cases of suppression of facts or misdeclaration.

The appellant argued that there was no suppression of facts or deliberate intent to evade tax, as they regularly paid taxes and cleared arrears promptly upon notification by the Revenue. They claimed financial constraints during the relevant period, requesting the penalty to be set aside. The Revenue supported the impugned order, advocating for the penalty imposition.

After reviewing the contentions, the Tribunal found that while penalties under Section 76 could be applicable for delays or failures, Section 78 penalties are triggered by fraud, collusion, wilful misstatement, or suppression of facts. In this case, such elements were not present, leading to the Tribunal setting aside the penalty under Section 78. The appellant was granted consequential benefits in accordance with the law.