TMI Blog2018 (2) TMI 845X X X X Extracts X X X X X X X X Extracts X X X X ..... e proves that there was reasonable cause for the said failure. On belated payment, the assessee has substantiated reasonable cause for the failure in payment of service tax, within the stipulated time and hence, he is entitled to the benefit under Section 80 of the Finance Act. There is no manifest error is committed by the CESTAT, Madras - appeal dismissed - decided against Revenue. - CMA No. 101 of 2018 - - - Dated:- 24-1-2018 - S. Manikumar And V. Bhavani Subbaroyan, JJ. For the Appellant : Mr.A.P.Srinivas JUDGMENT ( Order of the Court was delivered by S. Manikumar, J. ) Instant Civil Miscellaneous Appeal is filed against the final order made in No.40639 of 2015 dated 18.06.2015, on the file of CESTAT, Madras by which the tribunal, dismissed the appeal filed by the revenue, on the issue of imposition of penalty. 2. Facts relating to the appeal are that M/s.Sasi Advertising Private Limited, Coimbatore, respondent herein, engaged in services taxable, under Advertising Services had not remitted, service tax dues of ₹ 1,24,54,757/- within the stipulated dates, for the period from October 2002 to February 2009 and not paid the applicable interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e notice. 7. Supporting the same, Mr.A.P.Srinivas, learned Senior Standing counsel for Customs, Central Excise and Service Tax submitted that in the order, the Commissioner has observed that there is considerable force and merit in the plea made by the respondent company regarding the financial constraint, as well as still business competition in advertising service, as seen from the truncating volume of business during the period from 2004-05 to 2008-09. Whereas, respondent company has defaulted in monthly payment of service tax for the period October 2002 to February 2009; the Commissioner has relied on the data as regards volume of business only from 2005-06 leaving out the period October 2002 to March 2005. 8. Learned counsel further submitted that financial constraint cannot be held as a reasonable cause for the delay in payment of service tax. As per Rule 6 of the Service tax Rules, 1994, service tax shall be paid immediately, following the calendar month in which payments are received towards value of taxable services rendered. Having received the payment towards taxable services rendered including service tax, taxpayer is not justified in withholding tax dues to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 25.02.08 331 13 6,49,129 05.05.07 to 05.09.07 22.03.08 322 to 199 14 5,00,000 05.09.07 to 05.12.07 25.03.08 202 to 111 15 5,00,000 05.12.07 to 05.03.08 29.03.08 115 to 24 16 2,37,729 05.03.08 to 31.03.08 31.03.08 26 Sl. No. Service Tax amount (Rs.) Service Tax Delay in Payment (no. of days) Payable between / on Paid on 17 5,00,000 05.05.08 to 05.07.08 25.02.09 296 to 235 18 13,83,946 05.07.08 to 05.03.09 26.03.09 264 to 21 11. Referring to the abovesaid table, he submitted that it is apparent that respondent c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y on service tax and not on interest, is not acceptable. When interest is held as mandatory, penalty imposable under Section 76 of the Finance Act, 1994 is also mandatory, as held by the Hon'ble High Court of Rajasthan in Union of India Vs. Aakar Advertising, reported in 2008 (11) STR 5 (Raj.). Referring to Section 76 of the Finance Act, 1994, he submitted that any person, liable to pay service tax in accordance with the provisions of person 68 or the rules made thereunder and who fails to pay such tax, shall, in addition to paying such tax, an interest on that tax in accordance with the provisions of Section 75, be liable to penalty which shall not exceed the amount of service tax, that he failed to pay. 14. Learned counsel further submitted that when there is belated payment of service tax, the assessee is liable to pay interest along with penalty. Interest and penalty, follows delay in payment of service tax. In the present case, the respondent company had not paid service tax within the stipulated time for over 5 years, month after month and in most of the cases paid such service tax, much later than the prescribed due dates, without making payment of interest, at the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case and in the light of various judicial pronouncements and Bord's circular cited, that there is no case for imposition of penalty either under Section 76 or 77 of the Finance Act, 1994. In Commissioner of Central Excise, Jaipur-I Vs. Science Center reported in 2008 (9) STR 138 (Tri-Del.), it has been held that even if tax is deposited prior to issue of show cause notice, there cannot be any automatic waiver of penalty. In the above case, for the delay in payment of service tax, penalty imposed under Section 76 has been upheld, even when service tax is paid before issue of show cause notice. While doing so, Hon'ble Tribunal has relied on the judgment of a Division Bench of the Hon'ble High Court of Punjab and Haryana in Machino Montell (I) Ltd reported in 2006(4) STR 177(P H). The Hon'ble High Court of Rajasthan, in Union of India Vs. Aakar Advertising, reported in 2008 (11) STR 5 (Raj.) has held that penalty under Section 76 is mandatory and such penalty is not reducible below the minimum prescribed if reasonable cause for waiver is not shown. He reiterated that financial constraint cannot be a reasonable cause, for the failure to pay service tax within the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here under with the intent to evade payment of service tax, the person who has been served notice under sub-section (1) of section 73 shall, in addition to the service tax and interest specified in the notice, be also liable to pay a penalty not exceeding ten per cent. of the amount of such service tax : Provided that where service tax and interest is paid within a period of thirty days of i) the date of service of notice under sub-section (1) of section 73, no penalty shall be payable and proceedings in respect of such service tax and interest shall be deemed to be concluded; ii) the date of receipt of the order of the Central Excise Officer determining the amount of service tax under sub-section (2) of section 73, the penalty payable shall be twenty-five per cent. of the penalty imposed in that order, only if such reduced penalty is also paid within such period. 2) Where the amount of penalty is increased by the Commissioner (Appeals), the Appellate Tribunal or the court, as the case may be, over the above the amount as determined under sub-section (2) of section 73, the time within which the reduced penalty is payable under clause (ii) of the proviso to sub- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Service tax was not paid in time, which is a contravention of Section 68 of the Finance Act, 1994. Thus, invoking Sections 75 76 of the Finance Act, 1994, Commissioner of Central Excise, Customs and Service tax, Coimbatore, issued a show cause notice dated 21.10.2009 as to why, a) an amount of ₹ 12,63,324/- (Rupees Twelve lakhs sixty three thousand three thousand three hundred and twenty four only) being the interest on belated payment of Service Tax should not be demanded under Section 75 of the Finance Act, 1994. b) an amount of ₹ 5,23,151/ paid towards interest should not be appropriated for the interest payable. c) penalty amount of ₹ 19,75,894/- as detailed in Annexure III to the SCN should not be imposed on them under Section 76 and 77 of the Finance Act, 1994 for the Contravention of the provisions of the Finance Act, 1994, as amended. 24. Respondent/assessee has submitted a reply dated 14.12.2010 as well as additional written submissions dated 09.03.2010. During the course of personal hearing held on 09.03.2010, oral submissions were also made. 25. After considering the rival submissions and statutory provisions, vide order dated 12. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial on record discloses that interest payable on the belated payment of service tax was ₹ 12,63,324/- and that even prior to issuance of the show cause notice, assessee/respondent paid interest amount of ₹ 5,23,151/-. The remaining amount of ₹ 7,40,163/- had been paid on 03.11.2009 immediately on receipt of show cause notice dated 20.10.2009, i.e., within 13 days. 30. As per Section 80 of the Finance Act, 1994, notwithstanding anything contained in the provisions of Section 77 or 1st proviso to Section 78, no penalty shall be imposable on the assessee for any failure referred to in the said provisions, if the assessee proves that there was reasonable cause for the said failure. 31. Going through the reasons assigned by the assessee, on belated payment, we are of the view that the assessee has substantiated reasonable cause for the failure in payment of service tax, within the stipulated time and hence, he is entitled to the benefit under Section 80 of the Finance Act. 32. In the light of the above discussion and statutory provisions, we are of the view that no manifest error is committed by the CESTAT, Madras. Thus we answer to the substantial question of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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