2024 (2) TMI 1311 - AT - Service Tax

Levy of equivalent penalty imposed under Section 78 of the Finance Act, 1994 invocation of Section 80 of FA - Classification of service - Erection, Commissioning and Installation or not - providing services of fabrication and erection work of cement plant, sugar plant, coal mill, equipment, etc. - period from 10th September 2004 to 31st December 2008 - HELD THAT - The appellant failed to justify any reasonable cause for non-payment of Service Tax during the relevant period supported by evidences. Ignorance of law or belief of non-applicability of Service Tax to the services rendered for a long duration of five years cannot be considered as a reasonable cause nor difficulty in arranging working capital be considered as sufficient reason for non-payment of Service Tax during the relevant period. Cumulatively, it is not a fit case to invoke Section 80 of the Finance Act; hence, the penalty imposed by the learned Commissioner cannot be interfered with. The impugned order is upheld and the appeal is dismissed.

Summary

Issues involved:
The appeal challenges the penalty imposed under Section 78 of the Finance Act, 1994 for non-payment of Service Tax on services provided under the category of "Erection, Commissioning and Installation."

Summary:

Issue 1: Penalty under Section 78 of the Finance Act, 1994
The appellant, engaged in providing services of fabrication and erection work, did not take Service Tax registration under the relevant category. The show-cause notice was issued for recovery of Service Tax amount. The appellant contended that they were unaware of the taxable category and liability for Service Tax during the period. They argued that the services were initially considered works contract service. Despite facing financial crisis and delays, most of the Service Tax was paid before adjudication. The appellant sought the invocation of Section 80 of the Finance Act, 1994 to drop the penalty.

Issue 2: Justification for non-payment of Service Tax
The Revenue argued that the appellant failed to discharge Service Tax despite rendering taxable services, paying only after a visit by officers. The financial constraints were deemed insufficient grounds for invoking Section 80. The Commissioner noted that vital information was not furnished, and facts were suppressed to evade payment of duty. The demand for the extended period was confirmed, and penalty under Section 78 was imposed.

Judgment:
After hearing both sides and reviewing the records, the Tribunal found that the appellant did not provide reasonable cause for non-payment of Service Tax during the relevant period. Ignorance of the law or belief in non-applicability of Service Tax cannot justify the delay in payment. The financial difficulties faced were not considered sufficient reasons for non-payment. Consequently, the Tribunal upheld the penalty imposed by the Commissioner and dismissed the appeal.