2017 (4) TMI 897 - AT - Service Tax

Tribunal modifies order on interest, penalty, and late fee under Finance Act, 1994

The Tribunal set aside the demand for interest prior to 08.05.2010 and the penalty under Section 76 of the Finance Act, 1994, citing precedents and the ... Renting of Immovable Property Service - interest - penalties - case of appellant is that the appellant did not collect the service tax from the tenants as the tenants refused to pay service tax. For this reason appellants failed to discharge the liability of service tax to the department. However they later paid the service tax along with interest. The interest amount for the period from 08.05.2010 onwards was calculated and paid by appellant. That appellant is not liable to pay interest prior to this date and also not liable for penalty since the service were made taxable with effect from 01.07.2007 retrospectively. Held that: - The Hon’ble Apex Court in the case of Star India Pvt. Ltd.[2005 (3) TMI 10 - Supreme Court], held that interest need not be paid for the liability it is created retrospectively - interest on duty cannot be recovered from the respondents as liability to pay interest is in the nature of a quasi-punishment. The appellant is not liable to pay interest prior to 08.05.2010 and also the penalty. The appellant has paid the interest on the entire demand after 08.05.2010 till payment - the demand of interest and the penalty imposed u/s 76 is unsustainable. However, the late fee imposed u/s 70 of the FA, 1994 upheld. Appeal disposed off - decided partly in favor of assessee. Issues Involved:1. Liability to pay interest prior to 08.05.2010.2. Imposition of penalty under Section 76 of the Finance Act, 1994.3. Imposition of late fee under Section 70 of the Finance Act, 1994.Issue-wise Detailed Analysis:1. Liability to Pay Interest Prior to 08.05.2010:The appellant did not discharge their service tax liability for the period from 01.04.2008 to 31.03.2009. They paid the service tax along with interest from 08.05.2010 onwards, arguing that interest cannot be demanded retrospectively. The appellant relied on the Supreme Court judgment in STAR INDIA (Pvt) LIMITED V/s CCE Mumbai (Goa) 2006 (1) STR 73 (SC), which held that interest liability, although created retrospectively, could not entail the punishment of payment of interest with retrospective effect. The Tribunal agreed with this view, noting that the liability to pay interest arises only on default and is in the nature of quasi-punishment. Therefore, the appellant is not liable to pay interest prior to 08.05.2010.2. Imposition of Penalty under Section 76 of the Finance Act, 1994:The appellant contested the penalty imposed under Section 76, arguing that the retrospective amendment made by the Finance Act, 2010, which received Presidential assent on 08.05.2010, should not attract penalties for the period before this date. The Tribunal cited the validation clause in the Finance Bill, 2010, which stated that no act or omission shall be punishable as an offence if it would not have been so punishable had the amendment not come into force. The Tribunal found that the penalty imposed under Section 76 was unsustainable, following precedents set by the Supreme Court and other Tribunal judgments, such as BOC India Ltd. V/s CCE, Bangalore and Asean Aromatics Pvt. Ltd., Vs. CCE, Chennai.3. Imposition of Late Fee under Section 70 of the Finance Act, 1994:The appellant also challenged the late fee imposed under Section 70 for delayed filing of ST-3 returns. The Tribunal did not interfere with the late fee imposed, as it was a statutory requirement for filing returns and not directly related to the retrospective amendment issue.Conclusion:The Tribunal modified the impugned order by setting aside the demand for interest prior to 08.05.2010 and the penalty imposed under Section 76 of the Finance Act, 1994. However, the late fee imposed under Section 70 was upheld. The appeal was partly allowed in these terms. The order was pronounced on 11.04.2017 in open court.