2008 (7) TMI 41 - AT - Service Tax

CESTAT Chennai: Penalty under Finance Act vacated, Section 76, sustained under Section 77 for delayed returns

The Appellate Tribunal CESTAT, Chennai vacated the penalty under Section 76 of the Finance Act, 1994 but sustained the penalty under Section 77 for ... “Mandap Keeper” - assessee had got themselves registered as “Mandap Keeper” with the department as early as in 2001 - liability of filing service tax returns periodically was evaded by the party. The returns for the period of dispute (Sept.’03 to March’05) were filed belatedly – hence penalty u/s 77 is sustained - where the entire amount of tax was paid with interest prior to issuance of SCN, a penalty under Section 76 is liable to be vacated Issues:1. Imposition of penalties under Sections 76 & 77 of the Finance Act, 1994 for delayed payment of service tax and filing returns.2. Applicability of cited decision in Sieger Spintech Equipments (P) Ltd. Vs. Commissioner to the case.3. Registration as 'Mandap Keeper' in 2001 and subsequent evasion of statutory liabilities.Analysis:The judgment by the Appellate Tribunal CESTAT, Chennai dealt with the imposition of penalties under Sections 76 & 77 of the Finance Act, 1994 on an appellant registered as a 'Mandap Keeper' since 2001. The appellant had failed to file returns and pay service tax for the period September 2003 to March 2005, leading to penalties proposed by the department. The original authority imposed a penalty of Rs. 35,210 under Section 76 for delayed payment of service tax and Rs. 3,000 under Section 77 for delayed filing of returns. The appellant's appeal against these penalties was the subject of the current appeal.The appellant argued that penalties under Section 76 were not justified as the tax with interest had been paid before the show-cause notice was issued, citing the decision in Sieger Spintech Equipments (P) Ltd. Vs. Commissioner. However, the Tribunal noted that while the cited decision was relevant to the penalty under Section 76, it did not apply to the penalty under Section 77. The appellant's registration as a 'Mandap Keeper' in 2001 meant they were aware of their statutory liabilities, including filing service tax returns, which they had evaded for the period in question. Therefore, the appellant could not claim the benefit of the cited decision for the penalty under Section 77.Consequently, the Tribunal vacated the penalty under Section 76 but sustained the penalty under Section 77. The impugned order was modified accordingly, and the appeal was disposed of. The judgment highlights the importance of timely compliance with statutory obligations and the specific circumstances under which penalties under different sections of the Finance Act, 1994 may be imposed or waived.