2018 (2) TMI 572 - AT - Service Tax

Penalty u/s 77(2) of the FA 1994 - delay in filing the service tax return - penalty of Rs. 20, 000/- for each return - Held that - the adjudicating authority has imposed penalty under Section 77(2) for contravention of the provisions under section 70 of the Finance Act 1994 read with Rule 7 of the Service Tax Rules 1994 up to Rs. 1, 000/-. When the penalty has been imposed under Section 77(2) of the Finance Act 1994 in that circumstance penalty under Section 70 cannot be imposed on the assessee. penalty of Rs. 40, 000/- imposed on the appellant is set-aside and penalty of Rs. 1, 000/- imposed on the appellant under Section 77 of the Finance Act 1994 for contravention of provisions of Section 70 of the Finance Act 1994 read with Rule 7 of Service Tax Rules 1994 is confirmed. When penalty under Rule 7 has been imposed on the appellant no late fees can be imposed. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against penalty imposition for late filing of service tax return under Finance Act, 1994.

Analysis:
The appellant appealed against the penalty of Rs. 40,000 imposed on them for delayed filing of service tax returns for the period from April 2014 to March 2015. The adjudicating authority had ordered the appellant to pay Rs. 20,000 for each late filing, totaling Rs. 40,000, and imposed an additional penalty of Rs. 1,000 under Section 77(2) of the Finance Act, 1994. The appellant argued before the ld. Commissioner (Appeals) that they were not aware of the filing requirements and had engaged a Chartered Accountant for the task, resulting in delayed filing despite timely tax payment. However, the ld. Commissioner (Appeals) upheld the penalty. Upon review, it was found that the penalty was imposed under Section 77(2) for contravention of provisions under Section 70 of the Finance Act, 1994 read with Rule 7 of the Service Tax Rules, 1994, amounting to Rs. 1,000. The Tribunal noted that when a penalty is imposed under Section 77(2), no additional penalty under Section 70 can be levied. As the penalty of Rs. 1,000 was already imposed, further penalties were deemed unnecessary. Hence, the Rs. 40,000 penalty was set aside, and the Rs. 1,000 penalty was confirmed.

Additionally, the Tribunal clarified that when a penalty under Rule 7 is imposed, no late fees can be levied. Therefore, the order imposing late fees on the appellant was overturned. The appeal was allowed, and the penalty of Rs. 40,000 was cancelled, while the penalty of Rs. 1,000 under Section 77 of the Finance Act, 1994 was upheld. The Tribunal's decision was based on a thorough analysis of the relevant provisions of the Finance Act, 1994, and the Service Tax Rules, 1994, ensuring that penalties were appropriately applied and that no excessive penalties were imposed on the appellant.