Whether the penalty under Sections 76 and 77 can be imposed on late payment of ST as well as of ST-3?

PJ/Case Laws/ 2012-13/ 1188

Case:-PATIL TELESOLUTIONS V/S COMMISSIONER OF C. EX., NASHIK

Citation:- 2012 (27) S.T.R. 265 (Tri.-Mumbai)

Issue:- Whether the penalty under Sections 76 and 77 can be imposed on late payment of ST as well as of ST-3?

Brief Facts:- The appellant is a proprietary concern and holding Service Tax registration under the category of "Business Auxiliary Services". They have failed to pay Service Tax during the period from October, 2005 to Sept, 2006 by due dates. They also did not file ST-3 returns on due date. Therefore, proceedings were initiated against them under Sections 76 and 77 of the Finance Act, 1994. Accordingly penalty under Section 76 amounting to Rs. 93,900/- and a penalty of Rs. 2000/- under Section 77 were imposed by the lower adjudicating authority. The appellant challenged the same before the Commissioner (Appeals), who upheld the order of the lower adjudicating authority.

Appellant’s Contention: - The appellant contended that they are a proprietary concern and small businessman engaged in the marketing telephone services of M/s. Tata Teleservices Maharashtra Ltd. and the business is run by the proprietor himself. He is not in a position to engage any Accountant or any other staff for day to day business. Further Appellant contends that there is no case against them for not paying Service Tax and they have not filed the ST-3 return. The only charge is delay in paying the Service Tax and filing the Service Tax Return. They said that the whole Service Tax involved in the case has already been paid and Returns were filed before issuance of show-cause notice on 3-4-2008. Therefore, the penalty imposed against them is not sustainable as per Section 80 of the Finance Act, 1994. In support of his contention he has placed reliance on the Tribunal's decision in the case of Commissioner of Service Tax, Kolkata-1 v. D. Datta & Co. - 2007 (7) S.T.R. 282 (Tri.-Kol.).

Respondent’s Contention:- The respondent argued that the appellants were registered in the year 2005, therefore, they were not new to the provisions of Service Tax and the delay in payment of Service Tax and delay in filing the Service Tax Return cannot be a reason for not imposing penalty under Section 77 of the Finance Act, 1994. They submit that the appellants have repeatedly paid Service Tax late and filed the return late. They also placed reliance on the Hon'ble Supreme Court's decision in the case of Union of India v. Rajasthan Spinning & Weaving Mills - 2009 (238) E.L.T. 3 (S.C.).

Reasoning of Judgment:- The CESTAT held that the appellant is aggrieved by the penalty imposed under Sections 76 and 77 of the Finance Act, 1994. It is not in dispute that though the appellant paid Service Tax late and filed the Service Tax Return late but the appellant has paid the Service Tax and filed the Return on his own. Further they held that on perusal of perusal of show cause notice it was found that there is no case of suppression of facts. The contention of the appellant is dominant that they are small businessman and not in a position to appoint Accountant and other staff to look after the day to day work of Service Tax and due to this the payment was made late. So far as the contention of the respondent that repeatedly the appellant has paid the Service tax late and however the respondent has not able to produce any evidence to show any action taken against the appellant by the department on those occasions. The appellant is a small business man and proprietary concern and first time in the business, and paid the Service Tax on its own before being pointed out. Therefore, it is a reasonable ground for not imposing any penalty under Sections 76 and 77 ibid.

Similar view has been taken by the Tribunal in the case of D. Datta & Co. (supra), wherein it was held that the appellants were innocent and they filed Returns and deposited the Service Tax much before issuance of the show-cause notice, therefore, they had no intention to evade payment of Service Tax and upheld the lower appellate authority's order in not imposing the penalty. As regards the contention of the respondent regarding the applicability of Hon'ble Supreme Court's decision in the case of Rajasthan Spinning & Weaving Mills (supra), they find that in the show-cause notice there is no allegation of suppression of facts, fraud etc. as envisaged under Section 11AC of the Central Excise Act, 1944. Hence, this is not relevant to this case.

Decision: - Appeal was allowed.

Comment:- This is very important decision wherein the penalty cannot be imposed when there is no suppression but only a delay in payment of service tax and filing of ST-3 returns.

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PJ/Case Laws/ 2012-13/ 1188

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