2007 (8) TMI 73 - AT - Service Tax

Bombay HC overturns Tribunal decision on Service Tax penalty, remands for fresh review

The Hon'ble Bombay High Court set aside the Tribunal's decision to uphold a revised penalty of Rs. 53,034 imposed on the assessees for delayed Service Tax ... Penalty for delayed payment of service tax - Interpretation of Section 76 of the Finance Act, 1994 - Penalty at Rs. 100 per day for failure to pay tax - Application of Larger Bench precedent in ETA Engineering Ltd. v. CCE, ChennaiPenalty for delayed payment of service tax - Interpretation of Section 76 of the Finance Act, 1994 - Penalty at Rs. 100 per day for failure to pay tax - Application of Larger Bench precedent in ETA Engineering Ltd. v. CCE, Chennai - Validity of the enhanced penalty imposed on the assessees for delayed payment of service tax and whether it exceeds the limit prescribed under law - HELD THAT: - The adjudication record shows delayed payment of service tax and non-filing of ST-3 returns with delays ranging from 3 months to 58 months. The Larger Bench of the Tribunal in ETA Engineering Ltd. construed Section 76 to permit imposition of a penalty of Rs. 100 per day for each day of failure to pay tax after the due date. Applying that construction, the enhanced penalty revised by the Commissioner to Rs. 53,034 does not exceed the statutory rate of Rs. 100 per day for the period of delay recorded. In view of the Larger Bench decision and the fact that the penalty imposed is within the statutory per-day limit, there is no reason to interfere with the impugned order. [Paras 3, 4]The impugned order enhancing the penalty is upheld and the appeal is rejected.Final Conclusion: Relying on the Larger Bench interpretation of Section 76 that permits a penalty of Rs. 100 per day for failure to pay service tax, the Tribunal upholds the Commissioner's revision of the penalty and dismisses the appellants' appeal. Issues: Penalty imposition under Sec. 76 of the Finance Act, 1994 for delay in Service Tax payment.In this case, the Asstt. Commissioner imposed a penalty of Rs. 2500/- on the assessees for a delay in paying Service Tax under the Real Estate Agents category from October 1998 to June 2003. The department argued that the penalty was too low as per Sec. 76, which allows a penalty of Rs. 100/- per day for late payment. The Commissioner revised the penalty to Rs. 53,034/-, a decision upheld by the Tribunal. The Hon'ble Bombay High Court set aside the Tribunal's order and remanded the case for a fresh decision.The Tribunal noted that the appellants failed to pay Service Tax and file ST 3 returns on time, with delays ranging from 3 to 58 months. Referring to the ETA Engineering Ltd. v. CCE decision, the Tribunal clarified that a penalty of Rs. 100/- per day could be imposed for late payment. Considering the penalty did not exceed the prescribed limit, the Tribunal upheld the revised penalty and rejected the appeal.