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PJ/CASE STUDY/2010-11/45
16 March 2011

Short payment of service tax
 
PJ/Case Study/2010-11/45  

CASE STUDY

Prepared By:
Sukhvinder Kaur, LLB [FYIC]
And Parag Ghate, B. Com

Introduction: -
 
An assessee who is registered under the Department is required to deposit the service tax within prescribed time and has to file returns within the stipulated time. If there is delay then interest liability arises and even penal provisions can be invoked against the defaulter-assessee. However, in case there is reasonable cause for delay like the assessee is new to the levy and is depositing the tax for the first time or is filing the return for the first time, then should such an assessee be penalized. 

In the matter of M/s Shubham Sales, Jodhpur
[Order-In-Original no. 797/ST/2009-10 dated: 31.08.2010]

Brief facts of the case: -
 
The Noticee is registered under Service Tax and were filing ST-3 return. The Department scrutinized the half-year ending March, 2005 on 06.07.2005. The Department alleged that the Noticee had short paid service tax by a margin of Rs. 5559/- in as much as against the service tax liability of Rs. 38823/- and the Noticee had deposited only Rs. 28264/-.
 
Department also alleged that the Noticee had not deposited interest on delayed deposit in as much as service tax of Rs. 28264/- which was payable on 31.03.2005 was paid on 13.05.2005 and ST-3 Return for the Half year ending March, 2005 was to be filed on 06.07.2005.
 
Thereafter, Department issued show cause notice alleging that the Noticee by this act had contravened the provisions of Section 66 & 68 of the Finance Act, 1994. Service tax was demanded with interest and penalty was proposed to be imposed under Section 76 & 77 of the Finance Act, 1994.
 
Noticee’s Contentions: -
 
Noticee replied to the Show Cause Notice on the following contentions: 

  • The Noticee had paid the service tax on receipt of the amount. It was submitted that they were new assessee and were not fully aware with the preparation of service tax return. They had mentioned the billed amount in the proper column.
  • It was submitted that they were aware that service tax is payable on receipt basis and since there was receipt in the relevant quarter, service tax was not paid.
  •  It was submitted that even the amount billed in January and February, 2005 was realized in the month of April, 2005. As such we have deposited the tax for that in the month of June, 2005.
  • It was submitted that the Noticee were new assessee, they had not mentioned the challan related to next return. And there was delay in submission of return as it was their first return.
  • It was submitted that as the service tax had been deposited, therefore, no penalty should be imposed on them. 

Finding of the Adjudicating Authority: -
 
The Adjudicating Authority stated that the issues involved was whether there was short payment of service tax or not.
 
The Adjudicating Authority checked the ST-3 return for the Half year ending March, 2005 and found that during the said period, the Noticee has realized an amount of Rs. 3316000/- on which it has paid correct service tax of Rs. 28264/- vide TR ^ Challan dated 13.06.2000.
 
Thus, it was held that there was no short payment of service tax. It was held that there was delay in filing the ST-3 return for the period Half Year ending March, 2005. The return was filed on 06.07.2005 but it was required to be filed by 25.04.2005.
 
It was held that since it was new levy, so the Adjudicating Authority opted for Section 80 of the Finance Act, 1994.
 
Decision of the Adjudicating Authority:-
 
The amount deposited was appropriated towards service tax under Section 73 of the Finance Act, 1994 and ordered recovery of interest under Section 75 of the said Act. No penalty under Section 76 of the Finance Act, 1994.
 
Conclusion:-
 
The mistakes can be made by the assessee bona fidely and there might be a reasonable cause for such delay. For such mistakes the assessee cannot be penalized and therefore, Section 80 has been enacted in the Finance Act, 1994 to waive the imposition of penalty. In the instant case, the learned Adjudicating Authority rightly refrained from imposing any penalty on the Noticee as he had deposited the correct amount of service tax but the billed amount was mentioned in the ST-3.
 

******

 
 
 
 
 

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