By TIOL News Service

BANGALORE, SEPT 13, 2018: AGGRIEVED by the order of the CESTAT dated 12.01.2015 -   2015-TIOL-1034-CESTAT-BANG   rejecting their prayer to set aside penalty of Rs.1,11,000/- for failure to deposit timely the service tax of Rs.2,10,600/- on the professional services to the tune of Rs.17,55,000/- provided during the relevant period, the appellant is before the Karnataka High Court.

The contention of the appellant before the CESTAT while seeking relief from imposition of penalty was that their mother was suffering from heart problems and as such on account of expenses being spent by them towards the treatment, they were not in a position to pay service tax; that they were not recovering the service tax from their clients.

However, the CESTAT had rejected this plea by observing thus –

"…Admittedly, during the said period, the appellant did not shut their business on the said ground and continued to do so as during the said period, As is seen they have done the business to the extent of more than Rs. 17 lakhs. They also filed the returns showing their tax liability. The said facts are sufficient to observe that the appellant was aware of his liability to pay service tax. I also note that the service tax required to be paid by the appellant was not much on the higher side and they have done business of around Rs. 17 lakhs. They were definitely in a position to deposit the service tax of Rs. 2,00,000/- (Rupees Two lakhs only). However, instead of doing so, they took more than one and a quarter year to deposit the amount in question. In such circumstances, I am of the view that ill-health of the mother of the assessee's partner cannot be considered as a reasonable cause so as to invoke the provisions of Section 80 of the Finance Act, 1994…"

While concluding so, the Tribunal relied upon the decision in Triton Communication Pvt. Ltd. -   2005-TIOL-1640-CESTAT-MUM and upheld the penalty.

The High Court noted that the Tribunal had not recorded proper reasons relating to the appellant assessee and the Division Bench decision (in Raj Kumar Ora) cited by the assessee had been brushed aside by the single member of the Tribunal.

It was, therefore, observed -

"5. As to in what circumstances such family reasons will be reasonable cause or not would depend upon the facts of each case and therefore, unless the relevant details are discussed, the Tribunal could not have brushed aside these reasons by one liner, especially when the Division Bench decision of the Tribunal in almost similar circumstances on account of cancer of the father of the proprietor of the service provider firm, the Division Bench set aside the penalty in the aforesaid case of Raj Kumar Ora (supra). The Tribunal should maintain the consistency in the approaches, while dealing with the appeals…"

Concluding that the matter deserves to be reconsidered by the Tribunal in the facts and circumstances of the case, the impugned order was set aside and the matter remanded.

The appeal was accordingly allowed.

(See 2018-TIOL-1890-HC-KAR-ST)