2009 (9) TMI 523 - HC - Service Tax

Tribunal Upholds Decision on Service Tax Penalty Appeal

The Tribunal upheld the decision of the Commissioner (Appeal) to set aside a penalty imposed on a dealer for failing to deposit Service tax on time, ... Maintenance of appeal before High court – Held that: - we asked learned Counsel for the revenue the tax effect, which would be incurred by requiring the dealer-respondent to pay the penalty. The answer was that the tax effect would not be more than Rs. 30,000/-. Taking into account the meager amount involved, we are not inclined to admit the appeal to decide the question of law raised. However, it shall not be taken to mean that we have expressed any opinion on the question of law concerning payment of penalty under Section 77 of the Finance Act and the requirements of a-reasonable cause under Section 80 of the Finance Act. We leave those questions open and dismiss the appeal on the ground that meager sum is involved. Issues:1. Appeal against order setting aside penalty imposed under Section 77 of the Finance Act for failure to deposit Service tax within prescribed time.2. Interpretation of 'reasonable cause' for delay in payment of Service tax.3. Consideration of tax effect in deciding whether to admit the appeal.Analysis:1. The appeal was filed against an order setting aside a penalty imposed on a dealer for failure to deposit Service tax within the prescribed time. The Commissioner (Appeal) had found a reasonable cause for the delay in payment and modified the period of payment of interest, ultimately setting aside the penalty. The Tribunal upheld this decision, leading to the current appeal under Section 35(G) of the Central Excise Act, 1944 read with Section 83 of the Finance Act.2. The Commissioner (Appeal) accepted the dealer's plea that there was a reasonable cause for the delay in payment of Service tax. It was noted that the dealer availed services of goods transport operators and was liable to pay Service tax for a specific period. The payment was due by a certain date, but the dealer could only pay it later due to reasons such as misunderstanding regarding the obligation to pay Service tax and lack of awareness about relevant amendments. The Tribunal and the Commissioner (Appeal) considered these factors as constituting a reasonable cause for the delay, leading to the penalty being set aside.3. During the hearing, the Court inquired about the tax effect that would result from requiring the dealer to pay the penalty. Upon learning that the tax effect would not exceed Rs. 30,000, the Court decided not to admit the appeal. The Court clarified that this decision did not express any opinion on the legal questions regarding the payment of penalty under Section 77 of the Finance Act and the criteria for a reasonable cause under Section 80 of the Finance Act. The appeal was dismissed based on the minimal amount involved, leaving the legal questions open for future consideration.