2017 (3) TMI 469 - AT - Service Tax

Tribunal waives late fees and penalties under Finance Act, 1994 due to technical difficulties

The Tribunal allowed the appeal, setting aside the recovery of late fee and penalty under the Finance Act, 1994 for the periods of April 2011 to September ... Recovery of late fee under Section 70 of the Finance Act, 1994 read with Rule 7C - penalty under Section 77(2) of the Finance Act, 1994 - electronic filing (e-filing) errors in ACES - save status in e-filing - absence of willful default / non intentional failure to fileRecovery of late fee under Section 70 of the Finance Act, 1994 read with Rule 7C - penalty under Section 77(2) of the Finance Act, 1994 - electronic filing (e-filing) errors in ACES - absence of willful default / non intentional failure to file - Validity of imposition and recovery of late fee and penalty for the periods April 2011 to September 2011 and October 2011 to March 2012 in view of e filing having reached only 'Save' status and subsequent delayed electronic submission. - HELD THAT: - The Tribunal accepted the factual finding that the ST 3 returns for the impugned periods had been prepared in the ACES system and advanced up to the 'Save' stage but were electronically submitted only at a later date. It noted the Commissioner (Appeals)'s observation that the appellant's non submission was non intentional and amounted to ignorance rather than deliberate default, and that early stages of ACES implementation involved teething problems which affected even established assessees. Regard was also had to the appellant's limited literacy and status as a manpower service provider. Applying these considerations, the Tribunal concluded that the imposition and recovery of the late fee under Section 70 read with the rules and the penalty under Section 77(2) were not warranted on the facts, and therefore interference with the Commissioner (Appeals)'s favourable findings and the material circumstances was unnecessary.Order of recovery of late fee and imposition of penalty for the stated periods set aside; appeal allowed with consequential relief as per law.Final Conclusion: The appeal is allowed: the demand for late fee under Section 70 read with Rule 7C and the penalty under Section 77(2) for April 2011-September 2011 and October 2011-March 2012 is set aside in view of non intentional failure to electronically submit returns (stuck at 'Save' in ACES) and attendant circumstances; consequential relief to follow as per law. Issues: Recovery of late fee and penalty under Section 70 and Section 77 (2) of the Finance Act, 1994 for the periods April 2011 to September 2011 and October 2011 to March 2012.Analysis:1. Late Fee and Penalty Imposition for April 2011 to September 2011:The issue in appeal concerned the recovery of a late fee of Rs. 20,000 and a penalty of Rs. 2,000 under Section 70 of the Finance Act, 1994 for the period April 2011 to September 2011. The original authority had confirmed the imposition of the late fee and penalty. However, on appeal, the Commissioner (Appeals) allowed the appeal for this period, citing technical difficulties faced by the appellant while e-filing their ST-3 Return. The Commissioner observed that the appellant had finished filing the return up to the 'Save' stage, but due to a common problem in the system, they were unable to submit it on time. The Commissioner noted that the appellant's non-submission was unintentional and due to ignorance, especially considering the challenges faced during the initial stages of ACES implementation. Consequently, the late fee and penalty for this period were set aside, providing consequential relief.2. Late Fee and Penalty Imposition for October 2011 to March 2012:For the period of October 2011 to March 2012, the appeal filed by the appellant was rejected, and the original authority's order was upheld. The appellant's counsel argued that since a part of the earlier period had been allowed by the Commissioner (Appeals) based on the same grounds of technical difficulties, the appeal for this period should have been similarly allowed. The counsel highlighted that the returns were prepared in the system but not submitted due to inadvertence, especially given the appellant's status as a semi-literate service provider. After hearing both sides, the Tribunal noted that the appellant had indeed finished filing the returns up to the 'Save' status but only electronically submitted them on a later date. Considering the challenges faced during the initial ACES implementation and the appellant's circumstances, the Tribunal held that the recovery of late fee and penalty for this period was not warranted. Therefore, the late fee under Section 70 of the Act along with the penalty under Rule 77 (2) was set aside for this period as well, granting any consequential relief as per law.In conclusion, the Tribunal allowed the appeal, setting aside the recovery of late fee and penalty for both the periods of April 2011 to September 2011 and October 2011 to March 2012, based on the grounds of technical difficulties faced by the appellant and the unintentional nature of the non-submission of returns.