The Bangalore bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that failure to deposit money due to a financial crisis is not a reasonable cause for invoking provision under section 80 of the Finance Act, 1994.
Ace Test Labs and Consultancy, the appellant engaged in providing taxable services under the category of “Technical Testing and Analysis Services”. Based on intelligence, an investigation was initiated and a show-cause notice was issued to the appellant on 22/04/2014 alleging evasion of service tax of Rs.12,76,526/- for the period 01/10/2008 to 31/03/2013 and recovery of the same and proposing penalties under Sections 76, 77 and 78 of the Finance Act, 1994.
On adjudication, the demand was confirmed with interest. The Department filed an appeal before the Commissioner (Appeals) challenging the non-imposition of the penalty. The Commissioner (Appeals) modified the impugned order and imposed the penalty of Rs.5000/- under Section 77 and penalty under Section 78 of the Finance Act, 1994.
The proprietress of the appellant company was a housewife the entire business transactions and day-to-day affairs of the firm were handled by (late) Shri Pratap D Powani, General Manager, and her husband. It was submitted that the entire amount of demand of service tax along with interest was paid during adjudication proceedings.
Further, submitted that after the demise of her husband, the proprietress of the appellant has been facing a severe financial crisis and that she is raising funds for the treatment of kidney failure of her daughter. It was pleaded that in these circumstances, the penalty imposed on the appellant be waived by invoking Section 80 of the Finance Act, 1994.
The Commissioner(Appeals) observed that since the appellant paid the demanded service tax along with interest hence they can avail of the benefit of discharging 25% of the penalty as per Section 78(1) of the Finance Act, 1994.
The appellant collected service tax during the period 01/10/2008 to 31/03/2013 from the service receivers but failed to deposit the service tax amount so collected with the Government Treasury. The severe financial crisis cannot be a reasonable cause for non-payment of service tax even though collected from the customers but not deposited with the Government.
A Single member Comprising of Shri Dr D M Misra,(judicial) observed that the circumstances of financial difficulty in arranging the funds for payment of service tax collected and raising funds for the treatment of her daughter cannot be a ground to invoke Section 80 for setting aside the penalty imposed under Sections 77 and 78 of the Finance Act, 1994. The CESTAT upheld the impugned order and rejected the appeal.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
