TMI Blog2018 (9) TMI 825X X X X Extracts X X X X X X X X Extracts X X X X ..... Act would hold sway in the case of the appellant and, in fact, as per the provisions of that Section, on the basis of tax ascertained by the Department Officer, if the amount is paid up by the appellant before service of a notice on him, there shall not be served any notice under Sub-section 1 of Section 73 ibid. Once no notice was required to be issued, there would be no question of imposition of any penalties on the appellant. The appellant has paid up the service tax belatedly before issuance of SCN. The interest which is in the nature of compensation for the delay in payment, was also paid after issuance of SCN and much before issuing the Order-in-Original. The conduct of the appellant in paying up service tax and interest, and the categoric finding of the Commissioner that there is no intention to evade tax, persuades us to hold that appellant has established reasonable cause for invoking Section 80 of the Act ibid - the penalty imposed under Section 76 requires to be set aside - demand of tax with interest upheld. Appeal allowed in part. - Application No. ST/MISC[CT]/41510/2017, Appeal No. ST/00090/2012 - Final Order No. 41943/2018 - Dated:- 6-7-2018 - Ms. Sulekh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x and proposing to impose penalty under Section 78 of the Finance Act, 1994. The appellant paid the entire Service Tax of ₹ 3.53 crores along with interest of ₹ 52.46 lakhs by arranging funds from outside on very high interest. The Service Tax and interest payments were appropriated in the Order-in-Original No. 24/2009 dated 27.08.2009 and upon adjudication, the appellant availed the option payment of 25% of Penalty by paying ₹ 88.33 lakhs. (ii) The payment of these tax due, interest and 25% penalty resulted in delay in paying tax for the subsequent period coupled with non-receipt of payments from the service receivers. The appellant paid entire demand of ₹ 4,48,35,145/- towards service tax even before issuance of present Show Cause Notice, for the period August, 2008 to December, 2009 and intimated the Department. They also paid interest of ₹ 37,27,677/- after issue of Show Cause Notice. The present Show Cause Notice dated 12.05.2010 is also issued alleging suppression and invoking extended period. The Department was fully aware that appellant was making sincere and earnest efforts to pay up earlier dues and, thereafter, the demand for subsequent p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de the following main submissions. (i) Appellants had collected service tax component from their clients. When this is so, the amounts representing tax should have been remitted to the Government within the due dates, which was not done by the appellant. (ii) Appellants, instead of discharging their tax liability already collected from their clients, intentionally utilized the said amounts for running the day-to-day business. They cannot take the plea that delay in discharging tax liability in time was due to they being required to pay older arrears first. Appellants cannot claim that there was reasonable cause for their failure to discharge their tax liability. Mismanagement of funds, payment of older arrears on priority leading to financial hardship cannot be called reasonable cause for failure to discharge tax liability. Hence, financial hardship cannot be the ground for waiving penalty under Section 80 of the Finance Act, 1994. Even for the earlier period October, 2006 to July, 2008, appellants had made such delayed payments of service tax and penalty under Section 78 of the Finance Act had also been imposed on them in the adjudication order. In respect of the proceedin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the service charges; that there was severe financial crunch in 2006 and delay in implementation of two projects caused idle labour and idle capital goods [dead investment] and there was difficulty in arranging external borrowing on account of economy slowdown and down trend in financial markets. 5.4 We find that the appellants have also represented that from August, 2008 they had to borrow funds externally at huge interest rates and started to discharge all their liabilities; that while they were earnestly discharging all their liabilities for the period from September, 2006 to July, 2008 along with interest till 31.03.2009, the service tax payable from August, 2008 also got accumulated. However, in respect of the delayed payments, they have paid up the entire liabilities of ₹ 4.51 crores by March, 2010 including service tax payable up to the month of March, 2010, along with interest. 5.5 We note the appellants submission that all the ST-3 returns were filed before issue of Show Cause Notice. 5.6 We also find that the Ld. Adjudicating authority in para 7.0 and para 7.1 of the impugned order, has analysed the allegation as to whether appellants had intention to evad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t has been invoked without any evidence. However, the demand of Service Tax is not hit by time as the assessee filed the ST-3 returns for the period covered in the show cause notice on 27.04.2010 and the show cause notice has been issued within one year from the date of filing the ST-3 Returns. 5.7 We, thus, find that in the impugned order, a clear chit has been given to the appellant that there was no mala fide intention on their part and that proviso to Section 73(1) of the Act has been invoked without any evidence. As the Department has not come in appeal against this finding of the Commissioner and subsequent decision not to impose penalty under Section 78 ibid., it would only be presumed that the Department has accepted the impugned order in toto , including the said findings. 5.8 Once it has been held that service tax has not been paid on account of fraud or collusion or wilful misstatement or suppression of facts, etc., with intention to evade payment of service tax, the provisions of Section 73(3) of the Act would hold sway in the case of the appellant and, in fact, as per the provisions of that Section, on the basis of tax ascertained by the Department Officer, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vantageous position than a person who is imposed penalty for suppression of facts with intention to evade payment of tax. The Tribunal in the case of Mount Housing Infrastructure Ltd. Vs. C.C.E. S.T., Coimbatore, (supra) had occasion to analyse a similar issue. The relevant paragraph is noticed as under: 6. I have considered submissions on both sides. Imposing penalty equivalent to Service Tax paid belatedly in this case will amount to putting the appellant who paid tax before issue of SCN and interest before adjudication at a more disadvantageous position as compared to an assessee who would not have paid any tax and did not file any return. In latter type of cases penalty under Section 78 would be applicable and the assessee gets concession in paying 25% of duty as penalty if such payment is made promptly. The argument raised by Revenue can be canvassed even in a situation wherein an assessee pays both tax and interest before issue of SCN. That is, the interpretation canvassed by Revenue is to the effect that anybody who pays Service Tax along with interest before issue of SCN will be liable to pay penalty under Section 76 putting such assessees at a disadvantageous po ..... X X X X Extracts X X X X X X X X Extracts X X X X
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