Appellate tribunal overturns penalty for late service tax payment citing appellant's clean record and financial constraints.

The appellate tribunal nullified the penalty imposed under Section 76 of the Finance Act, 1994, on the appellants for delayed payment of service tax. The tribunal considered the regular payment history of the appellants, attributed the delay to financial constraints, and found no fraudulent intent. Consequently, the tribunal deemed the penalty unjustified and set it aside, allowing the appeal against the penalty under Section 76.

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Issues involved:
1. Imposition of penalty under Section 76 of the Finance Act, 1994.

Analysis:
The appellants, engaged in providing manpower supply and payroll processing, were found to have not paid service tax of Rs. 1,05,84,653 within the due date, as discovered during an audit. Subsequently, they paid the tax along with interest. A show-cause notice was issued proposing appropriation of the amounts paid towards tax and interest, along with penalties under Sections 76 & 78 of the Act. The Commissioner confirmed the tax liabilities and imposed a penalty under Section 76, excluding Section 78. The appeal was filed against the penalty under Section 76.

During the hearing, the appellant argued that there was no failure to discharge the tax liability but only a delay in payment, citing a Karnataka High Court decision to support their stance. The respondent contended that the habitual delay in payment cannot be condoned. The adjudicating authority noted the regular payment of service tax by the appellants with occasional delays, including the delayed payment in question, attributing it to financial constraints. The authority found no malafide intention to evade tax, leading to the conclusion that the penalty under Section 78 was not applicable. However, the penalty under Section 76 was confirmed due to the delay in payment.

The appellate tribunal observed that there was no appeal against the conclusion that fraud or suppression was absent. Considering the financial crunch as a mitigating factor and the payment of tax with interest, the tribunal found a reasonable cause for the delay in discharging the tax liability. Consequently, the imposition of penalty under Section 76 was deemed unjustified and set aside. The appeal was allowed to the extent of nullifying the penalty under Section 76 of the Finance Act, 1994.

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