Tribunal grants relief for service tax non-payment citing financial constraints, penalties set aside.

The Tribunal acknowledged the appellant's financial constraints due to non-payment by clients, finding reasonable cause for the failure to discharge service tax. Penalties under sections 77 and 78 were set aside, with the appeal partly allowed and consequential reliefs granted. The Tribunal noted the appellant's proper accounting practices and regular filing of returns, concluding there was no intentional evasion of service tax.

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Issues:
1. Appellant's liability for service tax on Man-power Recruitment and Supply Agency Service.
2. Imposition of penalties under sections 77 and 78 of the Finance Act, 1994.

Analysis:

Issue 1: Appellant's liability for service tax
The appellants were engaged in providing Man-power Recruitment and Supply Agency Service and were registered with the department. The original authority confirmed the demand of Rs. 19,64,360/- along with interest for not discharging service tax on the services provided. The Commissioner (Appeals) upheld the decision. The appellant contended that they faced financial constraints as their clients failed to pay the service tax to them, resulting in non-payment of service tax. The department had issued notices to service recipients to collect dues pending on their side. The appellant later paid the entire service tax, attributing the delay to non-payment by clients. The Tribunal acknowledged the financial constraints faced by the appellant due to non-payment by clients and held that the appellant had reasonable cause for failure to discharge service tax during the relevant period. The Tribunal found the appellant's explanation credible and set aside the penalties imposed under sections 77 and 78.

Issue 2: Imposition of penalties
The penalties under sections 77 and 78 were imposed on the appellants for failure to pay service tax within the prescribed time. The Revenue argued that the appellants failed to discharge the service tax liability and that explanations regarding non-payment by clients were unacceptable. However, the Tribunal considered the appellant's financial hardships due to non-payment by clients and the recovery of dues from service recipients by the department. The Tribunal noted that the appellants maintained proper accounts, filed returns regularly, and found no evidence of intentional evasion of service tax. Consequently, the Tribunal set aside the penalties under sections 77 and 78 by invoking section 80 of the Act, without disturbing the confirmation of demand or interest. The appeal was partly allowed, providing consequential reliefs as necessary.

In conclusion, the Tribunal recognized the appellant's genuine financial constraints due to non-payment by clients and found no evidence of intentional evasion of service tax. The penalties under sections 77 and 78 were set aside, and the appeal was partly allowed with consequential reliefs.

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