DELAY IN PAYMENT OF SERVICE TAX

[Mr. M. GOVINDARAJAN]

Sec. 68 of the Finance Act, 1994 imposes on obligation on the persons liable to pay service tax to pay the service tax to the credit of the Central Government. Rule 6 of Service tax Rules, 1994 provides the periodicity of the payment of service tax on monthly basis or quarterly basis. If the payable service tax is able to compute at the time of payment the rule provides for the provisional payment.  Service tax is paid to the credit of Central Government in time. There shall be no lapse on the part of the persons liable to pay service tax, to pay service tax in time.

Delay in payment of service tax would attract the payment of interest. Sec. 75 of the Finance Act, 1994 provides that every person, liable to pay the tax in accordance with the provisions of Sec. 68 or the rules made there under, who fails to credit the tax or any part thereof to the account of the Central Government within the period prescribed, shall pay interest at such rate not below ten per cent and not exceeding thirty six per cent per annum, as is for the time being fixed by the Central Government, by notification in the Official Gazette for the period by which such crediting of the tax or any part there of is delayed. Payment of interest in delayed payment of service tax is mandatory. There shall be no waiver of paying interest for delay in payment of service tax.

Sec. 78 of the Finance Act, 1994 provides penalty for failure to pay service tax. It provides that any person, liable to pay service tax in accordance with the provisions of Sec. 68 or the rules made there under who fails to pay such tax, shall pay, in addition to such tax and the interest on that tax amount in accordance with the provisions of Sec.75, a penalty which shall not be less than two hundred rupees for every day during which such failure continues or at the rate of two per cent of such tax, per month, which ever is higher, starting with the first day after the due date till the date of actual payment of the outstanding amount of service tax. The total amount of the penalty payable however shall not exceed the service tax payable.

Sec. 80 provides that no penalty shall be imposable on the assessee for any failure to pay service tax if the assessee proves that there was reasonable cause for the said failure.

The following are the case laws discussing the impact on delay in payment of service tax:

1. Handiman Services Limited V. Commissioner of Service Tax, Bangalore - 2008 (12) STR 765 (Tri. Bang)

The Original Authority had given a clear finding accepting the reasonable grounds made out by the assessee for not paying the tax in time. However they paid the tax before the issue of show cause notice under the Amnesty Scheme. The appellant contended that the imposition of penalty by the Revisionary Authority is not justified. The tribunal held that once the Original Authority has examined the reasonable grounds and found not fit for imposing penalty, then the same cannot be raised by the Commissioner.

2. Commissioner of Central Excise, Delhi V. Brill Education (India) Private Limited - 2008 (12) STR 759 (Tri. Del)

The respondents are engaged in business/profession of commercial training and coaching centre. A show cause notice was issued proposed demand of tax and penalty along with interest. The respondent deposited part amount of tax prior to the issue of show cause notice and also deposited the balance amount along with the interest after the issue of show cause notice. The Adjudicating Authority confirmed the demand of tax and also imposed penalty. A show cause notice was issued later under Sec. 84 for reviewing the Adjudication order. The Commissioner of Central Excise by the impugned order dropped the proceedings initiated under show cause notice.   Hence the Revenue filed this appeal.

The tribunal found that the respondents declared the entire value of taxable service in their service tax returns. The Commissioner (Appeals) dropped the proceedings following the clarification issued by CBEC vide Circular F.No. 137/167/06-CX-4, dated 3.10.2007, whereby it has been clarified that once the due service tax in full along with interest accrued on delayed payment is voluntarily deposited by the tax payer before issuance of show cause notice the entire proceedings are deemed to have been concluded. The tribunal did not find no infirmity in the order of the Commissioner (Appeals) and rejected the appeal of the Department.

3. Commissioner of Central Excise, Mangalore V. V.S. Patil - 2008 (12) STR 567 (Tri. Bang)

The respondent provided rent-a-cab service to BSNL for the period from 1.4.2001 to 31.3.204.  He failed to pay the service tax on the above amount. The Revenue proceeded against him and issued a show cause notice demanding service tax. The respondent paid the service tax with interest before issuance of show cause notice. The Assistant Commissioner confirmed the demand above with interest. Penalty was also imposed. The Commissioner (Appeals) waived the penalties on the ground that there was no malafide intention to evade service tax. The Revenue filed this appeal aggrieved against the order of the Commissioner (Appeals).

The Revenue contended that there was deliberate suppression with intent to evade service tax liability. The service provider registered with the department as early as on 10.9.2003 and paid the service tax on 10.9.2003 for the period from April 2001 to July 2002.   The period covered in this case is in continuation of the above mentioned period. Therefore, there is no reason for him to discontinue the payment of service tax.

The tribunal held that there is substance in the Revenue's contention. The tribunal ordered the payment of penalty limiting to 25% of service tax to meet the ends of the justice.

4. Akbar Travels India (P) Limited V. Commissioner of Service Tax, Bangalore - 2008 (12) STR 487 (Tri. Bang)

The appellant submitted that-

„« There was no intention to evade duty as the appellants were under the impression that the service tax was paid by the sub agents;

„« As the same has not paid and it was brought to their notice they took steps to deposit service tax along with interest;

„« In view of the above the Commissioner was justified in dropping the penalty under Sec. 76 and imposing lesser penalty under Sec. 78;

„« The Revisional Authority was not justified in enhancing the penalty.

The tribunal held that the original authority exercised his powers under Sec. 80 reasonably as bona fide action seen in belated deposit of tax and allowed the appeal.

5. FIITJEE Ltd., V. Commissioner of Central Excise, Jaipur - 2008 (12)STR 306 (Tri. Del)

The appellant paid the tax and filed the return and therefore the allegation of suppression of facts with intent to evade duty is not sustainable and Sec. 78 of the Finance Act cannot be invoked. The appellant is liable to pay differential tax and it was paid later.   Therefore the imposition of penalty under Sec. 76 is justified.

6. Ganesh Automobiles V. Commissioner of Central Excise, Jaipur - II - 2008 (12) STR 307 (Tri. Del)

The appellant paid the tax before the issue of show cause notice but they have not paid the interest along with the tax. Thus it is a clear case to pay the tax. Accordingly, the imposition of penalty under Sec. 76 and Sec. 77 of the Finance Act is upheld.

7. Jagdeep Singh Saluja V. Commissioner of Central Excise, Bhopal - 2008 (12) STR 309 (Tri. Del)

The appellant is a proprietorship firm and covered by the Board Circular No. B11/1/2002-TRU, dated 01.08.2002. In any event, the appellant paid the tax before issue of show cause notice. Thus the delay of payment of tax is due to the interpretation of statutory provision of law. Therefore the imposition of penalties is not warranted.

8. Modern Machinery Store V. Commissioner of Central Excise, Jaipur - I - 2008 (12) STR 162 (Tri. Del)

The appellant is rendering the services under the category of 'Authorized Automobile Service Station'. The Board's Circular dated 06.11.2006 indicates that there were certain doubts have arisen in respect of activities undertaken by authorized motor vehicle dealers and service stations and as to whether the commission received by the automobile dealers from Banks/Non Banking Finance Corporations for introducing the customer from seeking finances/loans to such banks/Non banking Financial Corporations is to be subjected to service tax. The Board clarified in such cases that the tax is payable on the commission received by the automobile dealers.

The tribunal found that there is confusion in the trade about liability of tax on such activity. After the Board's circular the appellant voluntarily deposited the service tax before issue of show cause notice. There is no mala fide intention on the part of the appellant for delay on payment of service tax. In view of the above the tribunal found that the penalties are not warranted.

9. Steel Craft (India) V. Commissioner of Central Excise, Jalandhar - 2008 (12) STR 125 (Tri. Del)

The appellant took a specific stand that they are providing the service of job worker and prior to10.9.2004 the same was exempted under Notification No. 25/2004 and therefore not liable to pay service tax prior to 10.9.2004. After that they are willing to pay tax.   They paid along with interest at their own before issuance of adjudication order. Sec. 80 provides notwithstanding anything contained in the provisions of Sec. 76 or 78, the penalty shall not be imposable on the assessee for any failure if he proves that there was reasonable cause for such failure. In this case the appellant proves that there was reasonable cause for not paying the service tax. It is not a fit case for imposition of penalty under Sec. 76 or 78.

10. Green Garden Services V. Commissioner of Central Excise & Customs, Nashik - 2008 (12) STR 133 (Tri. Mumbai)

The applicant is unable to state any genuine reason for delay in deposit of service tax and filing of returns. The delay is of repeated nature and range from 41 days to 229 days. The only plea is that the tax was paid along with interest. The tribunal rejected the prayer for waiver of pre deposit of penalty.

11. Commissioner of Central Excise, Mangalore V. Wood Worth Construction - 2008 (12) STR 12 (Tri. Bang)

Both service tax and interest are paid after lapses are point out. It is not proper to waive interest in the absence of provision for such waiver. Interest liability is to be discharged.