2004 (11) TMI 1 - AT - Service Tax

Service Tax (1) Interest for delay payment (2) Demand (3) Plea rejected (4) Penalty for delay in payment (5) Penalty for non-filing of returns

Summary

Issues:
- Applicability of service tax on training for security services
- Non-payment of service tax and registration by the appellants
- Show cause notice for recovery of service tax, interest, and penalties
- Payment made by the noticee before adjudication
- Imposition of interest, penalty under Section 76, and penalty under Section 77
- Consideration of ignorance as a defense for delayed payment
- Validity of interest charges under Section 75
- Discretion in levying penalties under Section 76
- Lack of speaking order by the lower appellate authority

Analysis:

The judgment by the Appellate Tribunal CESTAT (CHENNAI) dealt with the issue of the appellants providing training for security services during a period when service tax was applicable to such services. The appellants were found to have rendered security services for monetary consideration between 1999 and 2001 without paying the required tax or registering as service providers. A show cause notice was issued, leading to the original authority confirming a demand for service tax, interest, and penalties. The Commissioner (Appeals) upheld this decision, prompting the present appeal.

The appellants argued that since they paid the entire service tax before adjudication, it was unjust to levy interest or penalties equal to the tax amount. They claimed ignorance of the tax liability due to security services falling under service tax. The Tribunal noted the lack of a speaking order by the lower appellate authority and found the impugned order unsustainable.

Regarding the interest charges under Section 75, the Tribunal upheld them, citing the statutory provisions mandating interest payment for delayed tax dues. However, the Tribunal acknowledged the appellants' valid point concerning the discretion in levying penalties under Section 76. It highlighted the Supreme Court's ruling allowing assessing authorities to impose penalties lower than the prescribed maximum based on the circumstances of each case. The Tribunal reduced the penalty under Section 76 to Rs. 10,000, considering the timely tax payment and absence of intent to evade payment.

In contrast, the penalty under Section 77 for non-filing of service tax returns was upheld as it did not allow for flexible considerations. Section 77 prescribed a penalty of Rs. 1,000 for each instance of non-filing, totaling Rs. 4,000 in this case. Thus, the order of the lower authorities was affirmed, except for the reduction of the penalty under Section 76. The appeal was disposed of accordingly.