Per : Mr. H.K. Thakur; This appeal has been filed by appellant against OIA No.33/2010(STC)/HKJ/Commr.(A)Ahd, dt. 28.01.2010. Under this OIA first appellate authority has upheld the order of the adjudicating authority imposing penalties under Section 76, 77 and 78 of the Finance Act, 1994 with respect to the outdoor catering services provided by the appellant.
2. Shri Paritosh Gupta (Advocate) appearing on behalf of the appellant argued that the entire service tax alongwith interest was paid before the issue of show cause notice therefore no penalties were required to be imposed under Section 76, 77 and 78 of the Finance Act, 1994. It was his case that appellant got registered with the Revenue and started paying service tax and was also filing ST-3 returns regularly. However, due to some huge income tax liabilities they were not able to discharge full service tax liabilities and was not filing required ST-3 returns under the impression that their returns are required to be filed only once entire service tax dues are paid. As soon as the finances were available they paid the entire service tax liability alongwith interest. He brought to the notice of the bench Annexure B to the show cause notice indicating that some service tax was being paid regularly and huge amount of interest were also paid in the year 2007 for delayed payment as represented at the bottom of Annexure B of the show cause notice. It was thus his case that once the entire service tax liability was paid alongwith interest no penalties were imposable under Section 80 of the Finance Act, 1994 as there was reasonable cause of financial hardship. He relied upon following case laws on the issue:
i. R.K. Trading Co., Vs. Commissioner of Service Tax, Ahmedabad [2013 (31) S.T.R. 615 (Tri. Ahmd.)]
ii. C.C.E. & S.T. LTU, Bangalore Vs. Adecco Flexione Workforce Solutions Ltd. [2012 (26) S.T.R. 3 (Kar.)]
iii. Commissioner of Customs, C. Ex. & S.T., Guntur Vs. OTS Advertising Pvt. Ltd. [2013 (32) S.T.R. 303 (Tri. Bang.)]
3. Shri P.N. Sarvaiya (A.R.) appearing on behalf of the Revenue argued that short payment of service tax was only detected by the Revenue and as per para 8 of the OIA dt. 29.01.2010 the director of the appellant in his statements also confessed the fact that the payment was deliberately avoided by the appellant and appellant was not filing service tax returns in time.
4. Heard both sides and perused the case records. In the present proceedings appellant is not contesting the payment of service tax but has argued that due to financial hardship service tax could not be paid in time but the same was paid, alongwith interest, much before the issue of show cause notice. It was the case of the Revenue that there was a deliberate attempt to avoid the payment of service tax and non-filing of ST-3 returns as confessed by the director in his statements. However, it is observed from para 5 of the show cause notice dt. 29.06.2009 that no such confession by the director of the appellant was made to the extent that there was a deliberate attempt to evade payment of service tax. Further, it is observed from Annexure B to the show cause notice dt.29.06.2009 that appellant was discharging some duty and also paid interest for late payment before the issue of show cause notice. Appellant also filed ST-3 returns in the beginning and non-filing could have been easily detected by the Revenue on the basis of facts available on record. Though there was a delay in payment of service tax and non-filing of returns but there is no evidence or record that there was an intention on the part of the appellant to evade payment of service tax. Financial hardship as brought out by the appellant was a reasonable cause for delay in payment of service tax. In the case of C.C.E. & S.T. LTU, Bangalore Vs. Adecco Flexione Workforce Solutions Ltd. (supra), Karnataka High Court made the following observations: 3. Unfortunately the assessing authority as well as the appellate authority seem to think. If an assessee does not pay the tax within the stipulated time and regularly pays tax after the due date with interest. It is something which is not pardonable in law. Though the law does not say so, authorities working under the law seem to think otherwise and thus they are wasting that valuable time in proceeding against persons who are paying service tax with interest promptly. They are paid salary to act in accordance with law and to initiate proceedings against defaulters who have not paid service tax and interest in spite of service of notice calling upon them to make payment and certainly not to harass and initiate proceedings against persons who are paying tax with interest for delayed payment. It is high time, the authorities will change their attitude towards these tax payers, understanding the object with which this enactment is passed and also keep in mind the express provision as contained in sub-sec. (3) of Sec. 73. The Parliament has expressly stated that against persons who have paid tax with interest, no notice shall be served. If notices are issued contrary to the said Section, the person to be punished is the person who has issued notice and not the person to whom it is issued. We take that, in ignorance of law, the authorities are indulging in the extravaganza and wasting their precious time and also the time of the Tribunal and this Court. It is high time that the authorities shall issue appropriate directions to see that such tax payers are not harassed. If such instances are noticed by this Court hereafter, certainly it will be a case for taking proper action against those law breakers.
5. In view of the above relied upon case laws, it is held that there was reasonable cause for not paying service tax and penalties imposed under section 76 and 78 are required to be set aside. However, appellant was a service tax registered unit for a long time and was well aware of filing of ST-3 returns which was not done. Accordingly, penalty under Section 77 of the Finance Act, 1994 has been correctly imposed and upheld by the lower authorities.
6. In view of the above observations, appeal filed by the appellant is allowed with respect to the penalties imposed except penalty imposed under Section 77 of Finance Act, 1994 which is upheld. (Operative part of the order pronounced in the Court) (H.K. Thakur) Member (Technical) AVSP