2018 (8) TMI 423 - AT - Service Tax

Tribunal overturns penalty for appellants under Finance Act, citing lack of evidence and financial constraints.

M/s. Q Source Global Consulting Pvt. Ltd. Versus Commissioner of Central Excise, Chennai-IV

M/s. Q Source Global Consulting Pvt. Ltd. Versus Commissioner of Central Excise, Chennai-IV - TMI Issues:1. Contesting penalty imposed under Section 78 of the Finance Act, 1994.Analysis:The appellants, engaged in recruitment services, faced a demand for service tax for non-payment from February 2009 to December 2009. They admitted the liability, paid part of the tax, and faced a Show Cause Notice for the outstanding amount. The Original Authority confirmed the demand, interest, and imposed penalties under Sections 77 and 78. The appellants contested only the penalty under Section 78, arguing financial difficulties led to delayed payments. They cited cases to support their stance, emphasizing lack of intention to evade tax.The Department argued that non-payment before the Show Cause Notice disqualifies the appellants from relief under the Act. They claimed the appellants collected tax but failed to deposit it, indicating suppression of facts. Additionally, the non-filing of ST-3 returns invoked penalties under Section 78.The Tribunal considered the payments made by the appellants before and after the Show Cause Notice, highlighting financial constraints and administrative challenges. Citing legal precedents, they noted that penalties under Section 78 should apply only in cases of deliberate suppression, fraud, or collusion. Lack of evidence of intentional evasion led the Tribunal to set aside the penalty under Section 78. The impugned order was modified accordingly, without affecting the rest of the decision.A miscellaneous application was filed by the Department for a change in the respondent's name due to the introduction of GST. The Tribunal allowed the application, directing the registry to update the cause title. Consequently, the appeal was partly allowed with the mentioned changes, along with any consequential reliefs.In conclusion, the Tribunal ruled in favor of the appellants, setting aside the penalty under Section 78. The decision was based on the lack of evidence of intentional evasion and the appellants' efforts to pay the outstanding tax liabilities despite financial constraints. The case serves as a reminder that penalties should be imposed judiciously, considering the circumstances and intent of the parties involved.