2017 (9) TMI 456 - AT - Service Tax

Tribunal overturns penalties for non-filing of service tax returns, emphasizing liability assessment

M/s Cuddapah Tyre Retreaders Versus CC, CE & ST, Nellore

M/s Cuddapah Tyre Retreaders Versus CC, CE & ST, Nellore - 2017 (7) G. S. T. L. 211 (Tri. - Hyd.) Issues:1. Imposition of penalty under Section 77 of the Finance Act, 1994 for non-filing of ST-3 Returns.2. Interpretation of Section 70 of the Finance Act, 1994 regarding the requirement to furnish returns and imposition of penalties.Analysis:1. The appellant, a registered service tax provider, failed to file ST-3 Returns from April 2007 to September 2011, leading to a show cause notice alleging contravention of Section 70 of the Finance Act, 1994. The adjudication resulted in a penalty of Rs. 2,000 under Section 77 and a direction to file the returns with late fees. The First Appellate Authority upheld the decision, prompting an appeal challenging the penalties imposed.2. The appellant argued that they had ceased discharging service tax liability after obtaining registration, believing that retreading tires constituted manufacturing and was not subject to service tax. They cited a previous order supporting this view. The Department contended that penalties were justified due to the failure to file ST-3 returns, invoking Section 77 of the Finance Act, 1994.3. The Tribunal analyzed Section 70 of the Finance Act, 1994, which mandates the furnishing of returns by persons liable to pay service tax. It noted that the section applies when an assessee is liable to pay tax, emphasizing that the appellant's belief that they were not liable was supported by previous decisions. As no demand for service tax was made for the period in question despite registration, the Tribunal held that penalties for non-filing of returns were not sustainable.4. Consequently, the Tribunal found the impugned order unsustainable and set it aside, allowing the appeal against the penalties imposed under Section 77. The decision highlighted the importance of assessing an assessee's liability before penalizing for non-compliance with return filing requirements, ultimately ruling in favor of the appellant based on the interpretation of relevant legal provisions.5. In conclusion, the Tribunal's detailed analysis of the issues surrounding the imposition of penalties and the interpretation of Section 70 of the Finance Act, 1994 resulted in the setting aside of the penalties, providing clarity on the obligations of service tax providers and the circumstances under which penalties can be imposed for non-compliance with statutory requirements.