2019 (1) TMI 1431 - AT - Service Tax

Tribunal Partially Overturns Penalties in Tax Evasion Case

The Tribunal invoked Section 80 of the Finance Act, 1994, setting aside penalties under Sections 76 and 78 due to financial crisis and lack of evidence of ... Penalties u/s 77 and 78 of FA - belated payment of Service - ST-3 returns from April, 2005 to September, 2009 not filed - service tax with interest were paid on being pointed out - Held that:- It is not the case of the Revenue that the appellant had not paid/short paid the tax liability - The appellant has given plausible explanations and the same have not been found to be wrong by the Revenue, nor is there any whisper suspecting the bona fides in the pleadings of the appellant by the Revenue. The penalty imposed under Section 78 is liable to be set aside which we hereby do. The penalty imposed under Section 77, however, is upheld - appeal allowed in part. Issues:1. Non-payment of service tax by the appellant2. Imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 19943. Appellant's plea for dropping the proceedings based on payments made and financial crisis4. Arguments presented by both parties during the hearing5. Application of Section 80 of the Finance Act, 1994 in setting aside penaltiesAnalysis:Issue 1: Non-payment of service tax by the appellantThe appellant, engaged in Housekeeping and Secretarial Services, was found to have not paid service tax of Rs. 68,01,113 collected from customers for a specific period. The audit revealed delayed payments and non-filing of ST-3 returns. The Show Cause Notice proposed recovery of the unpaid tax, interest, and penalties under relevant sections of the Finance Act, 1994. Despite partial payments made by the appellant, the lower adjudicating authority confirmed the demand and interest, leading to the current appeal.Issue 2: Imposition of penalties under Sections 76, 77, and 78The dispute primarily revolved around the penalties imposed on the appellant under Sections 77 and 78 of the Finance Act, 1994. The appellant argued financial difficulties as the reason for delayed payments, emphasizing the absence of any intention to evade tax. Citing precedents and decisions from the CESTAT, the appellant sought waiver of the penalties. The Tribunal analyzed the circumstances, considering the financial crisis faced by the appellant and the absence of evidence indicating willful evasion. Relying on legal precedents, the Tribunal invoked Section 80 of the Finance Act, 1994, to set aside penalties under Sections 76 and 78 while upholding the penalty under Section 77.Issue 3: Appellant's plea for dropping the proceedings based on payments made and financial crisisDuring the hearing, the appellant's advocates highlighted the immediate steps taken by the appellant upon audit findings, attributing the delays to financial constraints. The appellant's plea to drop the proceedings was based on substantial payments made before the Show Cause Notice and the financial crisis faced during the relevant period. The Tribunal considered the appellant's explanations, finding them plausible and in line with the precedents where penalties were set aside due to financial hardships.Issue 4: Arguments presented by both parties during the hearingThe appellant's advocates argued the financial crisis faced by the appellant, emphasizing the lack of mala fide intent and requesting penalty waiver. In contrast, the Revenue supported the lower authorities' findings. The Tribunal carefully examined the contentions, reviewed relevant case laws, and assessed the circumstances to reach a decision on the penalties imposed.Issue 5: Application of Section 80 of the Finance Act, 1994 in setting aside penaltiesDrawing from legal precedents and the appellant's explanations, the Tribunal invoked Section 80 of the Finance Act, 1994, to set aside penalties under Sections 76 and 78. The Tribunal found the appellant's reasons for delayed payments valid, considering the financial crisis and absence of evidence suggesting intentional tax evasion. The penalty under Section 77 was upheld, concluding the appeal in part in favor of the appellant.This detailed analysis of the judgment highlights the key issues, arguments presented, legal considerations, and the Tribunal's decision regarding the non-payment of service tax and the imposition of penalties under the Finance Act, 1994.