Appellant's Good Faith Prevails: Penalties Set Aside in Service Tax Case

The Tribunal found no evidence of malafide intention on the part of the Appellant in a case involving short deposit of service tax due to financial difficulties. As the tax was paid before the show cause notice and the Appellant was eligible for benefits under section 73(3), the penalty imposed under various sections was set aside. The appeal was allowed with consequential reliefs, if any. The judgment was delivered by the Appellate Tribunal CESTAT MUMBAI on 22/03/2018.

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Issues: Short deposit of service tax, imposition of penalties under various sections, financial difficulty leading to delayed deposit, absence of malafide intention, eligibility for benefit under section 73(3), setting aside of penalty

In this case, the Appellant, a registered service tax payer, made a short deposit of service tax under the category of "Accommodation Services" for a specific period and did not pay service tax for another period. A show cause notice was issued demanding the short paid service tax and penalties under sections 76, 77, and 78, along with late fees. The adjudicating authority confirmed the demand and imposed penalties. The Commissioner (Appeals) rejected the appeal, leading to the present appeal by the Appellant.

The Advocate for the Appellant argued that the delayed deposit was due to financial difficulty, with no allegation of suppression or fraud in the notice. The burden of proof was on the revenue to establish malafide intention. On the other hand, the Assistant Commissioner supported the impugned order, stating that the revenue detected the short payment, making the Appellant liable for penalties.

Upon reviewing the case and the impugned order, the Tribunal found no evidence of malafide intention on the part of the Appellant. The Appellant's authorized person attributed the delay to financial and bank-related problems. Additionally, the service tax was paid before the show cause notice was issued. As the Appellant deposited the tax, they were eligible for the benefit under section 73(3). The Tribunal concluded that there was no basis for imposing a penalty on the Appellant. Since the service tax levy was not disputed and had been paid with interest, the penalty was set aside. The appeal was allowed with consequential reliefs, if any.

The judgment was pronounced in court on 22/03/2018 by Shri Ramesh Nair, Member (Judicial) and Shri Raju, Member (Technical) of the Appellate Tribunal CESTAT MUMBAI.

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