2016 (11) TMI 787 - AT - Service Tax

Tribunal confirms penalty for misdeclaration of taxable service value by Engineers Enterprises

Commissioner of Central Excise & Service Tax, Jamshedpur Versus M/s. Engineers Enterprises

Commissioner of Central Excise & Service Tax, Jamshedpur Versus M/s. Engineers Enterprises - TMI Issues:Alleged misdeclaration/suppression of taxable service value in ST-3 returns, imposition of penalty under Section 78 of the Finance Act, 1994, appeal against penalty imposition, applicability of precedents on penalty determination, exercise of 25% penalty payment option, technical error in filling ST-3 return, intention of misdeclaration, lack of professional guidance, payment of tax liability before show cause notice, payment of interest under Section 75 of the Finance Act, purchase of peace of mind through penalty payment.Analysis:The case involved allegations of misdeclaration/suppression of taxable service value by M/s. Engineers Enterprises in their ST-3 returns for the period October 2005 to September 2010. The Adjudicating Authority confirmed the misdeclaration and imposed a penalty of Rs. 9,67,373 under Section 78 of the Finance Act, 1994, along with interest. The department appealed against the option allowing the appellant to pay 25% of the penalty within 30 days, contending that the penalty should be at least equal to the evaded service tax amount, citing legal precedents such as the case of M/s. Dharamendra Textiles Processors.The Commissioner (Appeals) upheld the Order-in-Original, stating that the Adjudicating Authority correctly applied Section 78 and the 25% penalty option. The department's argument on the applicability of legal precedents was dismissed as mischievous and illegal. The respondent's representative argued that the misdeclaration was a technical error due to lack of professional guidance, with no intention to deceive. The respondent had major clients like Tata Steel, Jamshedpur, and promptly paid the tax liability upon detection of the error, even before the show cause notice was issued.The respondent exercised the 25% penalty payment option to resolve the dispute and ensure peace of mind. The Advocate for the respondent emphasized that the error was unintentional and promptly rectified. The Adjudicating Authority's order was deemed appropriate by the Commissioner (Appeals), who rejected the department's appeal. The Tribunal concurred with the Commissioner's decision, finding no error in the 25% penalty payment option granted to the respondent. The appeal filed by the department was consequently rejected, affirming the lower authorities' orders.In conclusion, the Tribunal upheld the decision of the lower authorities, emphasizing the correctness of applying Section 78 and the validity of the 25% penalty payment option. The case highlighted the importance of rectifying technical errors promptly and cooperating with tax authorities to resolve discrepancies, ultimately leading to the rejection of the department's appeal and the confirmation of the penalty imposition.