2019 (7) TMI 115 - AT - Service Tax

Tribunal Upholds Service Tax Demand and Penalties, Orders Recalculation for Jamshedpur Branch

Tops Security Ltd. Versus Commissioner of Central Excise & ST, Jamshedpur and Commissioner of Central Excise & ST, Bhubaneswar

Tops Security Ltd. Versus Commissioner of Central Excise & ST, Jamshedpur and Commissioner of Central Excise & ST, Bhubaneswar - TMI Issues Involved:1. Demand of service tax and interest.2. Imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994.3. Computational errors in the demand.4. Financial hardship as a defense for non-payment of service tax.5. Invocation of extended period of limitation.6. Applicability of Section 80 for waiver of penalties.Issue-wise Detailed Analysis:1. Demand of Service Tax and Interest:The appellants, registered providers of 'Security Agency Services,' were found to have raised invoices including service tax but failed to deposit the collected tax with the government. Investigations revealed substantial amounts of unpaid service tax for both the Jamshedpur and Bhubaneswar branches. The Commissioner of Jamshedpur demanded Rs. 90,35,823 in service tax for the period 2004-05 to 2008-09, while the Commissioner of Bhubaneswar confirmed a demand of Rs. 58,03,816 for a similar period. The appellants admitted the liability and paid portions of the tax and interest during the investigation.2. Imposition of Penalties:Penalties were imposed under Sections 76, 77, and 78 of the Finance Act, 1994. The Jamshedpur branch faced a penalty of Rs. 1 crore under Section 76 and Rs. 200 per day under Section 77. The Bhubaneswar branch was penalized Rs. 58,03,816 under Section 78, with a provision to reduce it to 25% if paid within 30 days, and Rs. 5000 under Section 77. The tribunal upheld the imposition of penalties, emphasizing that non-payment of collected tax amounts to misappropriation of funds held in trust for the government.3. Computational Errors:The appellants argued computational errors in the service tax demand for the Jamshedpur branch, claiming an excess demand of Rs. 11,21,563. The tribunal directed the adjudicating authority to recompute the demand, considering the appellant's submissions and additional payment documents.4. Financial Hardship as a Defense:The tribunal rejected financial hardship as a valid defense for non-payment of service tax. It emphasized that collected tax amounts are held in trust for the government, and financial difficulties cannot justify misappropriation. The tribunal cited previous decisions, including the Delhi Bench's ruling in the appellant's own case, which held that financial crunch cannot justify non-deposit of collected service tax.5. Invocation of Extended Period of Limitation:The appellants argued against the invocation of the extended period of limitation, claiming they had no intention to evade tax and had paid substantial amounts before the issuance of the show cause notice. The tribunal rejected this argument, noting that the appellants had not filed ST-3 returns regularly and had collected but not deposited the tax, justifying the extended period.6. Applicability of Section 80 for Waiver of Penalties:The appellants sought waiver of penalties under Section 80, citing financial hardships. The tribunal rejected this plea, referencing several decisions that financial hardship does not constitute 'reasonable cause' under Section 80. It upheld the penalties, noting that the appellants' actions amounted to deliberate evasion of tax.Conclusion:The tribunal upheld the demand of service tax, interest, and penalties for both branches, with a directive to recompute the demand for the Jamshedpur branch. The appellants' arguments on computational errors and financial hardship were addressed, but the tribunal maintained that penalties were justified due to the deliberate non-payment of collected tax. The appeals were largely dismissed, with specific directions for recalculating the tax and penalties for the Jamshedpur branch.