Appeal partially allowed, penalties set aside, Section 80 invoked for financial hardship. Late filing fee upheld.

The appeal was partially allowed by the Appellate Tribunal CESTAT CHENNAI, setting aside the penalties under Sections 76 & 77 of the Finance Act, 1994. The Tribunal invoked Section 80 due to the financial hardship cited by the appellant, leading to the delayed tax payment. However, the late fee for delayed filing of ST3 Returns was upheld. The tax liability amount of Rs. 4,79,636/- confirmed by the original authority and upheld by the lower appellate authority remained unchanged.

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Issues:
Imposition of penalty under Sections 76 and 77 of the Finance Act, 1994 on the appellant for not paying service tax liability on time.

Analysis:
The Appellate Tribunal CESTAT CHENNAI addressed the issue of penalty imposition under Sections 76 and 77 of the Finance Act, 1994 on the appellant for failing to pay the service tax liability on time. The appellants supplied manpower to a company and were required to discharge service tax liability under "Man Power Recruitment or Supply Service." The records revealed that the appellants had not paid the service tax liability of Rs. 4,79,636/- on the gross amount of Rs. 46,56,658/- collected during April 2009 to September 2009 within the prescribed dates, although it was paid belatedly with interest. An adjudication order confirmed the demand for tax liability and imposed penalties, which was upheld by the lower appellate authority. The appeal before the forum focused solely on the issue of penalty imposition.

During the hearing, the appellant's consultant explained that financial hardship prevented timely remittance of the tax liability, but the entire tax liability along with interest was paid before the adjudication order. The consultant argued that penalties should be set aside considering the circumstances. On the contrary, the respondent supported the impugned order.

After hearing both sides and examining the facts, the Tribunal noted that the appellants did discharge the tax liability, albeit belatedly, along with interest. The Tribunal considered the financial difficulties cited by the consultant as a reasonable cause for the delay in tax payment. Consequently, the Tribunal invoked Section 80 and set aside the penalties under Sections 76 & 77 of the Act. However, the late fee of Rs. 2000/- imposed for delayed filing of ST3 Returns was not interfered with. It was clarified that the demand of Rs. 4,79,636/- confirmed by the original authority and upheld by the lower appellate authority remained unchanged.

In conclusion, the appeal was partially allowed with the penalties under Sections 76 & 77 being set aside due to the reasonable cause of financial hardship leading to the delayed tax payment, while the late fee for filing returns was upheld.

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