2024 (12) TMI 797 - AT - Service Tax

Levy of penalty u/s 78 of Finance Act 1994 - Non-discharge of applicable service tax on the services rendered - liability of service tax on account of diesel charges reimbursed. Whether the service tax liability of Rs.2, 19, 175/- on account of diesel charges reimbursed can be fastened to the appellants? - HELD THAT - It is found from the agreement in Annexure 1 Part 3 that No advance for diesel/consumables shall be paid to service provider however bills for the same will be reimbursed on actual basis within 72 hrs. subject to verification and approval by the head of the Network O M Dept. - it is very clear that the expenses on account of diesel are reimbursable to the appellants; therefore the cost of the same cannot be included in the assessable value for payment of service tax purposes following the decision of the Hon ble Apex Court in the case of UNION OF INDIA AND ANR. VERSUS M/S. INTERCONTINENTAL CONSULTANTS AND TECHNOCRATS PVT. LTD. 2018 (3) TMI 357 - SUPREME COURT . Whether the appellant is required to pay penalty under Section 78 of Finance Act 1994? - HELD THAT - The appellants are regular assessee having registered with Service Tax Department. It is only during a certain period between 2008 to 2010 the appellants did not remit the service tax due. It is an undeniable fact that the said service tax has been recovered by the appellants from their customers. As it has been recovered from their customers the plea of financial difficulty has no substance. The appellants should have deposited the service tax at least as and when their customers paid them. Similarly it is very difficult to believe that resignation of a couple of officers during a particular period resulted in non-payment of service tax more so looking into the fact that there is nothing on record to show that other activities of the company have been hampered due to such resignations. It is beyond comprehension that only payment of service tax gets disturbed. There are considerable force in the submissions of the learned Authorized Representative for the Department that the audit did not consider the issue as the Department was otherwise seized of the same and has written number of letters to the appellant and only as a consequence the appellants have discharged their tax liability along with interest. Argument on the basis of ST-3 Returns filed after payment of tax only after being asked to pay duty by the Department is of no avail. It is the argument of the Department that nothing is brought on record to show the bona fides of the appellants; therefore extended period has been rightly invoked and penalty under Section 78 has been rightly imposed; no option is required to be given by the authority and it is for the appellants to avail the facility. The appellants have deposited the requisite service tax along with interest albeit after being informed by the Department by a series of letters - the interest of justice would be served if the appellant is given an option to pay 25% of the penalty - appellants have deposited 25% of the penalty as per the Miscellaneous Order dated 29.07.2013 given by this Bench and duty and interest have already been paid. The appeal is partly allowed restricting the penalty imposed under Section 78 to 25% of the amount specified in the Order-in-Original.

Summary

Issues involved:
1. Imposition of service tax liability and penalties for non-payment and delayed payment.
2. Discrepancy in service tax liability on reimbursable expenses.
3. Invocation of extended period for penalty under Section 78 of Finance Act, 1994.

Detailed Analysis:

1. The appellant, a consulting engineering services provider, failed to discharge service tax liabilities for the period 01.04.2009 to 31.03.2010. The Central Excise Division requested payment and issued a Show Cause Notice for Rs. 46,36,744/-, which was confirmed by the original authority. The appellant claimed financial difficulties and delayed payment due to resignations of key officers. The Commissioner (Appeals) upheld the decision, leading to the current appeal.

2. The appellant argued that a service tax liability of Rs.2,19,175/- on reimbursable diesel expenses was wrongly imposed. The agreement clarified that such expenses were reimbursable, citing legal precedents to support their case.

3. The Department contended that the appellant did not pay service tax voluntarily, evidenced by multiple requests and summons. The appellant's failure to file returns and collect service tax from customers indicated an intent to evade payment. The Department invoked the extended period for penalty under Section 78.

4. The Tribunal analyzed the arguments and evidence. It found that the appellant's financial difficulties and officer resignations did not justify non-payment, especially as service tax was recovered from customers. The audit's lack of discrepancy findings did not negate the extended period invocation. The Tribunal allowed the appellant to pay 25% of the penalty, considering the circumstances.

5. Ultimately, the Tribunal partially allowed the appeal, reducing the penalty under Section 78 to 25% of the original amount specified in the Order-in-Original, emphasizing the importance of justice in the decision-making process.