2010 (4) TMI 459 - AT - Service Tax

Delay in payment of service tax -Penalty -there was delay in payment of service tax on the part of the appellant.While paying the service tax, the appellant also deposited interest payable. Further, since there was delay in filing ST-3 return, the appellant also paid penalty of Rs. 2,000 under section 77 of the Finance Act, 1994, and is not contesting the same. SCN issued as the appellant had not paid interest correctly, thus demand of penalty u/s 76 and 77 made. Held that - since the date of presentation of cheque was not available on challan assessee could not treat date of cheque as dte of presentation of cheque thus interest has been correctlt demanded. But penalty u/s 76 set aside.

Summary

Issues:
Delay in payment of service tax, incorrect calculation of interest, imposition of penalties under sections 76 and 77, interpretation of rules regarding payment date, waiver of penalties.

Analysis:
1. The appellant, a company providing various services, faced a delay in paying service tax from October 2006 to March 2007. The appellant paid the tax with interest and a penalty of Rs. 2,000 under section 77 of the Finance Act, 1994. However, a show-cause notice was issued due to incorrect interest calculation, leading to penalties of Rs. 2,49,395 under section 76 and Rs. 2,000 under section 77.

2. The main issue revolved around the penalty under section 76. The appellant argued that a previous tribunal ruling and a circular supported their case, stating that no penalty should be imposed if service tax and interest were paid. The Department, however, contended that the show-cause notice was correctly issued, and penalties were justified due to non-payment of the full amount.

3. The Tribunal considered the conflicting arguments and focused on whether the date of presentation of the cheque or the realization date should be deemed as the payment date. Rule 6(2A) of Service Tax Rules, 1994 clarified that the date of presentation of the cheque is the payment date, supported by relevant circulars and manuals. The appellant's belief in considering the cheque presentation date as the payment date was deemed reasonable, leading to the waiver of penalty under section 76.

4. The Tribunal emphasized that the appellant's lack of evidence regarding the cheque presentation date did not warrant fault, given the rule's clarity on payment date determination. Consequently, the penalty under section 76 was set aside, while the penalty under section 77 was not contested and upheld. The appellant was directed to pay the demanded interest, and the appeal was allowed by dismissing the penalty under section 76.

5. In conclusion, the judgment clarified the interpretation of rules regarding payment dates for service tax, highlighting the importance of following established guidelines and providing relief to the appellant for a genuine misunderstanding. The waiver of penalties under section 76 showcased a fair application of legal principles in the case.