2005 (6) TMI 9 - AT - Service Tax

Management Consultant Penalized for Late Service Tax Payment; Ignorance of Law Not Excused

Suchita Ethnic Marketing Services Pvt. Ltd. Versus CCE, Mumbai-II

The Tribunal upheld the imposition of a penalty on a Management Consultant for late payment of service tax, despite the appellant's argument that ... Stay / Dispensation of pre-deposit Issues: Waiver of penalty under Service Tax Act for late filing of returns and late deposit of service tax.Analysis:1. The appellant, a Management Consultant, failed to deposit service tax for the period June 2000 to January 2002, later depositing it on 24-4-2002 after registering with the Central Excise department. The appellant argues that since the entire service tax was deposited with interest, no penalty should be imposed, citing Section 80 of the Finance Act, 1994, which allows for no penalty in case of a reasonable cause for non-compliance with service tax provisions.2. The Revenue argues that ignorance of the law is not an excuse, asserting that penalties are applicable under Sections 76 and 77 of the Finance Act, 1994. They contend that the cases cited by the appellant had reasonable causes for non-imposition of penalties, unlike the present case where ignorance alone cannot be considered a reasonable cause. The Revenue emphasizes that if ignorance is accepted as a reasonable cause, no penalty can be imposed under service tax provisions.3. The Tribunal concurs with the Revenue, noting that the cases cited by the appellant had specific reasons and circumstances justifying non-imposition of penalties. For instance, in the Tyazhpromexport case, being a foreign company without a business place in India was deemed a sufficient cause for penalty waiver under Section 80. Similarly, in the Mogaveera Vyavasthapaka Mandali case, being a charitable institution engaged in charitable services was considered a reasonable cause for penalty waiver.4. In contrast, the Tribunal finds that the appellant, despite consulting a Chartered Accountant for registration upon starting the Management Consultancy firm, failed to pay service tax for two years. This indicates the appellant's awareness of the tax obligations, leading to the conclusion that the penalty is justified. Consequently, the Tribunal directs the appellant to deposit Rs. 75,000 towards penalty within eight weeks, with the balance amount waived pending compliance.5. The decision highlights the importance of compliance with tax obligations and the significance of reasonable cause in penalty waivers under the Service Tax Act. The judgment underscores that mere ignorance or lack of awareness cannot serve as a valid excuse for non-compliance, especially when the taxpayer had knowledge of the tax requirements. Compliance with tax laws is crucial to avoid penalties and ensure fair treatment under the legal framework.