By TIOL News Service

BANGALORE, JUNE 09, 2018: DURING audit, it was observed that the assessee had failed to pay service tax for the period from 2008-09 to June 2009. On pointing out, assessee paid the service tax, but failed to pay the interest for delayed payment.

A SCN was issued demanding interest and also proposing imposition of penalty. The adjudicating authority appropriated the interest which was paid after the issuance of SCN and also imposed penalties u/ss 76 & 77 of the FA, 1994.

The Commissioner(A) rejected the plea made by the appellant for waiver of penalties.

Before the CESTAT, the appellant submitted that they were under severe financial constraints; that during pendency of the proceedings the Proprietor had passed away after prolonged illness but nonetheless, they had deposited the entire service tax before issuance of SCN and interest was deposited thereafter; that penalties need to be waived in terms of s.80 of the FA, 1994. Case laws were cited in support.

The AR submitted that the appellant had collected service tax from customers but the same was not deposited into Government Treasury for a fairly long period of time i.e. from 2008-09 to June 2009 and, therefore, no benefits can be extended in terms of s.80 of the FA, 1994. Inasmuch as there was suppression on the part of the appellant to evade payment of tax. Case laws were cited wherein it is held that in such circumstances, penalties cannout be waived u/s 80 of the FA, 1994.

The Bench considered the submissions and observed -

++ Assessee has collected the service tax but has not deposited the same in Government Treasury for fairly a long period of time and on being pointed out by Department, the assessee discharged the service tax and interest was paid after the issue of SCN but before adjudication.

++ The ground raised by assessee that they had financial difficulties, on account of which they could not pay the service tax, is not a valid ground as they have collected the service tax from their customers.

++ Tribunal in the case of Triton Communication Pvt. Ltd. 2005-TIOL-1640-CESTAT-BANG has held that financial crisis is not a reasonable cause for failure to pay tax.

Having found no infirmity in the impugned order, the appeal was dismissed.

(See 2018-TIOL-1776-CESTAT-BANG)