ST - Tax and interest were paid without waiting for SCN by recourse to loan from a bank - Penalties waived u/s 80 of FA, 1994: CESTAT
By TIOL News Service
MUMBAI, AUG 12, 2016: THE assessee, registered as provider of 'advertising agency' service, despite collecting tax from their customers for the period from April 2006 to April 2007, did not discharge their obligations to pay tax and file the returns thereafter.
Before the original authority, the appellant submitted that they had been regular in paying service tax on the basis of billings till March 2006 and thereafter on receipt basis. It was claimed that some of their clients had defaulted on payments leading to financial crisis and this prevented them from discharging their tax obligations;that they had deposited an amount of Rs.71,85,266/- towards tax and interest for the period between April 2006 and April 2007.
The CST, Mumbai confirmed the tax demand of Rs.65,40,206/- and interest of Rs.6,41,878/- besides imposing penalty under sections 76 and 78 of Finance Act, 1994.
Against this order, both the appellant assessee and Revenue are in appeal before the CESTAT.
Revenue is aggrieved by the fact that penalty is not in consonance with Section 76 of the Finance Act,1994 which prescribes that higher of the two i.e. Rs. 200/- per day or 2% of the tax per month is the mandatory penalty.
The assessee inter alia submitted that proviso to section 73(3) estopping issue of notice is applicable as the tax liability was discharged along with interest as early as December 2007. Moreover, they are liable to tax only from 01.05.2006 under the category 'sale of space or time for advertisement' and not as "advertising agency".
Reliance is also placed in support on the following decisions viz. Star Neon Singh - 2002-TIOL-167-CESTAT-DEL, Ajanta Fabrication - 2006-TIOL-202-CESTAT-DEL, Market Chase Advertising - 2008-TIOL-780-CESTAT-MAD, Azad Publications - 2004-TIOL-177-CESTAT-DEL and Rex Advertisers - 2006-TIOL-1009-CESTAT-BANG.
The AR seeks to derive mileage from the apex court decision in Dharamendra Textile Processors - 2008-TIOL-192-SC-CX-LB which held that mandatory penalty in tax statutes cannot be diluted for any reason whatsoever.
The CESTAT negated the claim of the appellant that they are liable to tax only from 01.05.2006 under the category 'sale of space or time for advertisement' and not as “advertising agency” by observing that the appellant had assessed themselves to tax under ‘advertising agency' and had not challenged the same.
As regards request by the appellant assessee for invoking section 80 of FA, 1994 and waiving the penalties imposed, the Bench observed -
"8. We do not find any reason to disbelieve their claim of inability to pay tax owing to lack of funds. Such possibilities can and do occur in the world of business. That, however, does not confer immunity from being proceeded against for failure to comply with tax obligations. There is also no doubt that there is an obligation cast upon every service provider to collect the tax due through the service recipient and deposit the amount with the exchequer. However, the law does contemplate and is not averse to use of the tax so collected within the business till the stipulated date for payment. That this period was unilaterally extended by the assessee is not in dispute. Yet, the contention of the assessee that delay is not evidence of intention to evade tax is not one that can be dismissed out of hand. A delay is, without doubt, a delay but, in the absence of any other convincing evidence, is more reflective of lack of promptitude than deliberate evasion. Tax and interest were paid without waiting for a show cause notice by recourse to loan from a bank. The need to issue notice is, therefore, questionable and taxability before May 2006 is a matter of doubt."
Taking the view that it is a fit case for invoking of the provisions of Section 80the penalties imposed were set aside.
The Revenue appeal, seeking enhancement of penalty, was dismissed.
(See 2016-TIOL-2053-CESTAT-MUM)
