2005 (6) TMI 1 - AT - Service Tax

Penalty u/s 76 and 77 - waiver of penalty u/s 80 - default of payment of Service tax - HELD THAT - In the instant case it is the appellant s contention that their explanation of the delay was not considered. What appears from the Order-in-Original is that their explanation was considered. The only explanation offered by the party is that they had financial difficulties and hence happened to pay tax belatedly. As regards non-filing of returns they can have no such explanation. A plea of financial hardships cannot by itself be a satisfactory cause of delayed payment of service tax. Otherwise every assessee can escape penal liability u/s 76 of the Finance Act 1994. It needs to be mentioned that financial difficulty is not a circumstance beyond one s control. It is something for which remedies are available in the commercial world. What Section 80 envisages is a cause or reason (for delayed payment of service tax) which is beyond the assessee s control and could be brought home to a quasi judicial authority to its satisfaction. In the present case no such circumstance is obtaining and therefore Section 80 would not come to the rescue of the assessee. The question now is what should be the quanta of penalties under Sections 76 77. Ld. Commissioner (Appeals) has reduced the penalty u/s 76 to Rs. One lakh in an apparent exercise of discretion. This Tribunal does not want to sit in judgment over such exercise of discretion. In the result the penalty of Rs. One lakh will stand affirmed. I am of the view that in determining the quantum of penalty regard should be had to the fact that the penalty imposable under this provision for a major part of the period of dispute was Rs. 2, 000/- only. Consequently I would limit Section 77 penalty to Rs. 2, 000/-. Except in this respect the impugned order is sustained. The appeal stands disposed of.

Summary

Issues: Default in payment of service tax and filing of returns leading to penalties under Sections 76 & 77 of the Finance Act, 1994.

Analysis:
1. The appellants, providers of taxable services, defaulted in paying service tax for quarters of 1998-2001, paid tax on 12-3-2002, and filed returns late. Penalties were proposed under Sections 76 & 77. Adjudicating authority imposed penalties of Rs. 3,45,293/- and Rs. 3,000/-. First appellate authority upheld the decision but reduced penalty under Section 76 to Rs. One lakh. Appellants appealed, arguing no penalty should apply as tax was paid with interest before the show cause notice, citing Section 80 benefits and Tribunal precedents. Department relied on case laws.

2. The central issue was whether penalties under Sections 76 & 77 could be imposed when service tax was paid with interest before the notice. Section 76 penalizes delay in payment, irrespective of explanations. Section 77 penalizes delay in filing returns. Section 80 allows exoneration if sufficient cause for delay is proven. Appellants claimed financial difficulties caused delays, but financial hardship alone isn't a satisfactory cause. Section 80 requires reasons beyond the assessee's control, which wasn't proven here. Tribunal upheld the penalty of Rs. One lakh under Section 76.

3. Regarding Section 77 penalties, the provision prescribed Rs. 2,000/- for most of the dispute period, with variations. The penalty was limited to Rs. 2,000/- considering the historical penalty amounts. The Tribunal affirmed the penalty of Rs. One lakh under Section 76 and limited the Section 77 penalty to Rs. 2,000/-. The appeal was disposed of accordingly.