Misrepresented Two Challans used for Payment of previous period service tax: CESTAT Upholds Penalty u/s 78(1) [Read Order]

The New Delhi bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) upheld the penalty under Section 78(1) of the Finance Act, 1994 as it was evident that the appellant have misrepresented two challans used for payment of previous period service tax.

Suresh Singh, the appellant challenged the order which confirmed the service tax liability of Rs.18,07,429/- as against Rs.37,90,922/-. The appellant are engaged in providing services of Manpower. On the basis of Form 26AS (2014-15) investigation was initiated, wherein it was found that appellant has received consideration from various parties for providing manpower. The appellant has also not filed any Service Tax Return for the said period.

Show cause notice dated 15.10.2018 was issued to the appellant for the period 2014–15 demanding a sum of Rs.37,90,922/- under Section 73(1) of the Finance Act, 1994, along with interest under Section 75 and penalties under Sections 76 & 77(1)(a) Section 77(2) and 78 of the Finance Act. The appellant neither filed its reply to the show cause notice nor attended the personal hearing, despite several opportunities granted to them to represent through video conference.

The appellant completely failed to place on record their defence and as a result, the Adjudicating Authority decided the case ex parte on the basis of the income tax returns confirming the demand of Rs.37,90,922/- along with interest and penalty. Being aggrieved, the appellant filed an appeal and during the course of hearing, the appellant produced the copy of the statement in Form 26AS for the year 2014–15, sample, copies of the work orders and copies of the challan were also produced as evidence for payment of service tax made during the year 2014–15.

On examining the documents submitted, the Commissioner (Appeals) re-determined the total service tax liability of the appellant for the period 2014–15 as Rs.18,07,429/- and not Rs.37,90,922/-. Further, on examining the challans, it was found that out of eight challans, two challans amounting to Rs.3,51,891/- and Rs.34,857/- bearing numbers 00001 and 00002 dated 3.09.2014 were actually utilised by them for payment of service tax of the year 2013–14 and since the appellant had already paid the tax in excess of the service tax liability for the year 2014–15, short paid service tax amounting to Rs.3,52,468/- was held liable to be recovered along with interest.

The appellant had produced the copy of the challans as evidence to support that he has already paid the service tax in discharge of his liability for the year 2014-15. The Appellate Authority taking note of the same had concluded that the service tax liability of the appellant was Rs.18,07,429/- as against Rs.37,90,922/-.

However, while examining the challans, the Appellate Authority found that the two challans were the subject matter of the appeal No.177/ST/2022 for the period 2013-14 and the appellant had inadvertently shown these challans for the period 2014-15. There is no error in ignoring the two challans which were towards the service tax liability for the previous year. The Commissioner (Appeals) has correctly re-determined the service tax liability of the appellant.

A single bench of Binu Tamta, Member (Judicial) observed that since there was delay in payment of service tax, the levy of interest is automatic and the same is therefore, recoverable from the appellant. According to the Revenue, the appellant has misrepresented the two challans which were actually used in payment of service tax for the previous period, i.e., 2013–14, and therefore, the extended period has been rightly invoked.

The penalty under Section 78(1) of the Act has been rightly imposed and the Appellate Authority has consciously reduced the same to the reduced amount of service tax liability. Lastly, the penalty imposed under Section 77(1)(a)and section 77(2) on the ground that though the appellant had already obtained the service tax registration from the Department, however, did not properly assess and pay the service tax. The tribunal confirmed the impugned order and dismissed the appeal.

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