2010 (12) TMI 553 - AT - Service Tax

Tribunal upholds penalty for service tax shortfall, reduces penalty due to reasonable cause. Revenue appeal rejected.

COMMISSIONER OF C. EX., RAJKOT Versus PORT OFFICER

The Tribunal upheld the penalty of Rs. 10,000 imposed by the Commissioner (Appeals) on the assessee for short payment of service tax. The Tribunal found ... Penalty - Quantum of penalty - Reduce the penalty under Section 76 - Reasonable cause for delay in payment - It is seen that the assessee had raised invoices and had shown 8% towards service tax during the relevant period of four days - The differential amount and interest was paid - The original adjudicating authority had imposed a penalty of ₹ 20,000/-which was reduced to ₹ 10,000/- by the Commissioner (Appeals) - The provisions of Section 76 read with Section 80, would mean that the penalty cannot be reduced but can only be waived totally - The question of enhancement does not arise - Hence, it is not in a position to hold that penalty is to be reduced to zero in the absence of the appeal by the assessee - The Appellate Court can reconsider the matter and find out whether the discretion used by the authority was proper or not - Find that assessee has shown reasonable cause and therefore, there is no need for enhancement of penalty - Accordingly, the appeal filed by the Revenue is rejected. Issues Involved:1. Short payment of service tax by the assessee.2. Imposition and reduction of penalty under Sections 76 and 78 of the Finance Act, 1994.3. Application of Section 80 of the Finance Act, 1994.4. Discretion to reduce penalty under Section 76 of the Finance Act, 1994.5. Reasonable cause for failure to pay the correct service tax rate.Issue-wise Detailed Analysis:1. Short Payment of Service Tax:The assessee, M/s. Gujarat Maritime Board, failed to discharge the service tax at the rate of 10% and 2% education cess, instead paying at the rate of 8% during the period from 11-9-2004 to 13-9-2004. This resulted in a short payment of Rs. 93,621/-. The differential service tax was paid by 2-9-2006, and interest was paid on 20-12-2007.2. Imposition and Reduction of Penalty:Initially, the original adjudicating authority imposed a penalty of Rs. 20,000/- under Section 76, which was set aside by the Commissioner (Appeals). In the second round, the original adjudicating authority imposed a penalty equal to the service tax under Section 76, which was reduced to Rs. 10,000/- by the Commissioner (Appeals). The Tribunal rejected the Revenue's appeal for enhancement of the penalty.3. Application of Section 80 of the Finance Act, 1994:Section 80 provides that no penalty shall be imposable if the assessee proves that there was a reasonable cause for failure. The Hon'ble Gujarat High Court emphasized that the onus to establish reasonable cause is on the assessee, and once established, the authority has the discretion to hold that no penalty is imposable. The Tribunal initially failed to consider Sections 76 and 80 properly, leading to the High Court remanding the matter back to the Tribunal.4. Discretion to Reduce Penalty under Section 76:The Tribunal and Commissioner (Appeals) considered that there was reasonable cause for the delay in payment. The Commissioner (Appeals) had reduced the penalty based on the reasonable cause shown by the assessee, such as the remote location, holidays, and communication issues. The Tribunal agreed with this view and held that the penalty could not be enhanced in the absence of an appeal by the assessee against the reduced amount.5. Reasonable Cause for Failure:The assessee argued that the delay was due to the remote location, holidays, and erratic electricity and telephone services, which delayed the intimation of the increased service tax rate. The Tribunal found these reasons to constitute a reasonable cause under Section 80, thereby justifying the reduction of the penalty.Conclusion:The Tribunal concluded that the assessee had shown reasonable cause for the delay in payment of the correct service tax rate. The appeal filed by the Revenue for enhancement of the penalty was rejected, and the penalty of Rs. 10,000/- imposed by the Commissioner (Appeals) was upheld. The Tribunal emphasized that the discretion to reduce the penalty under Section 76 was exercised judiciously, and there was no need for enhancement. The appeal was disposed of accordingly.