Whether the penalty is imposable under Section 77 of the Finance Act, 1994 and Rule 7C of the Service Tax Rules in case of late filling of ‘nil’ ST returns?

PJ/Case Laws/2012-13/1378

Case:-M/S AMARPALI BARTER PVT LTD. & M/S VIJAY LAXMI PROMOTERS PVT LTD V/S COMMISSIONER OF SERVICE TAX, KOLKATA

Citation:-2013-TIOL-32-CESTAT-KOL

Brief Facts: - The applicants are engaged in providing the taxable services under the category of 'construction in respect of commercial or industrial building and civil structure services'. For rendering the said services, the Appellants were registered with the Service Tax Department. The appellants had filed Six 'nil' returns in ST-3 form for the period from September, 2005 to March, 2008 on 18/11/2008. Consequently, show cause notice was issued to each of them proposing penalty under Rule 7C of the Service Tax Rules, 1944 and Section 77 of the Finance Act, 1994. The adjudicating authority directed the appellants to pay Rs.12000/- for each ST-3 Return and also imposed penalty of Rs.2,000/- under Section 77 of Finance Act, 1994 against each of the Appellants. Aggrieved by the same, the Appellants filed Appeals before the Ld. Commissioner (Appeals). The Ld. Commissioner (Appeals) dropped the penalty under Section 77 of the Finance Act but confirmed the penalty of Rs.12000/- against each of the Appellant under Rule 7C of Service Tax Rules. Thus, the appellants are in present appeal.

Appellant’s Contention: - The appellant contended that in view of the circular No. 97/8/07-ST dated 23/8/07, they were not supposed to file half yearly returns in ST-3 form as the liability to pay service tax during the said period was nil. They further submitted that during the period they have not provided any service and hence there was no liability to pay service tax. However, as a matter of abundant precaution, they have submitted six half yearly 'nil' returns from the period April, 2005 to March, 2008 on 18/11/08. Further, they submitted that in view of the proviso to Rule 7C, the Authorities ought to have waived the late fees.

Respondent’s Contention: - The respondent has reiterated the findings of the Commissioner (Appeals) and submitted that the Commissioner (Appeals) has already dropped the penalty under Section 77 of the Finance Act, 1994. Therefore, there is no reason to waive the late fees directed to be paid under Rule 7C of the Service Tax Rules, 1994.

Reasoning of Judgment: - The Hon’ble Tribunal held that the appellant were registered with the Service Tax Department for providing taxable services. It is also not in dispute that during the period April 2005 to March, 2008, they have not provided any service and also they have not filed any returns with the Department. They have filed six ST-3 nil Returns belatedly on 18/11/2008. Thus, they agree with the appellants that in view of the circular dated 23/8/2007, in the event no service is rendered by the service provider, there is no requirement to file ST-3 Return. They respondent could not produce anything contrary to the said circular. Besides, they find that as per Rule 7C of the Service Tax Rule, in the event 'nil' returns are filed, the assessing officer had the discretion to waive the late fees for filing the ST-3 Returns.
They held that it is a fit case to invoke the proviso to Rule 7C and waive the late fees relating to the Nil Returns filed by each of the Appellant during the period April, 2005 to March, 2008. In these circumstances, the order of the Commissioner (Appeals) is set aside and thus, the appeals filed by the Appellants are allowed.

Decision: - The appeal was allowed.

Comment:-The analogy drawn from this case is that penalty may be waived for late filing of NIL service tax returns as the assessing officers have been given the power of discretion to waive the same in special cases.

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PJ/Case Laws/2012-13/1378

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