2009 (8) TMI 289 - AT - Service Tax

Penalty - The issue involved in this case being that the appellant is allegedly charging, collecting but not depositing the service tax with the department, which was noticed by the authorities on verification of the records - The period involved in this case is from January 2007 to June 2007 Appellant submits that the delay in discharging the tax liability in the impugned period, was due to severe financial crunch. He submits that the Board s Circular No. 137/167/2006-CX-4, dated 3-10-2007 would squarely cover the issue in favour of the appellant - Circular No. 137/167/2006-CX-4 clarifying that SCN not to be issued when service tax paid with interest and proceedings deemed as concluded Tribunal in similar situation in Vee Aar Secure v. Commissioner of Service Tax, Bangalore 2009 - TMI - 32930 - CESTAT, BANGALORE , set aside the penalty - we find that the appellants have made out a prima fade case in their favour for non-imposition of penalty under Sections 76, 77and 78 Penalty set aside

Summary

The Appellate Tribunal CESTAT, Bangalore heard an appeal against an Order-in-Original passed by the Commissioner of Service Tax, Bangalore. The issue involved an appellant allegedly charging, collecting, but not depositing service tax with the department from January 2007 to June 2007. The appellant admitted a delay in discharging the service tax due to financial difficulties and non-payment from a client. The lower authorities issued a show cause notice for the demand of service tax, interest, and penalties. The appellant contested the notice, claiming remedies under Section 73(3) of the Act. The authorities confirmed the demand and imposed penalties under Sections 76, 77, and 78 of the Finance Act, 1994. The appellant appealed the penalties.

The appellant argued that the penalties were unjustified due to financial constraints and prompt payment in previous years. The Department argued that penalties were warranted due to non-payment and non-filing of returns. The Tribunal found that the appellant had discharged the tax liability with interest before the conclusion of proceedings, invoking Section 73(3) of the Act. They referenced a Board Circular supporting this conclusion. The Tribunal cited previous cases where penalties were waived when the tax liability was paid immediately after being pointed out. Following these precedents, the Tribunal set aside the penalties under Sections 76, 77, and 78 of the Finance Act, 1994. The appeal was allowed with consequential relief. The decision was pronounced on August 6, 2009.