Service tax payment delay due to delay in receipt of payment: Karnataka HC Directs CA Firm to Settle with Rs.2,50,000 Payment

V.K. Niranjan And Co. Vs Commissioner of Service Tax (Karnataka High Court)

The legal battle between V.K. Niranjan And Co. and the Commissioner of Service Tax, as unfolded in the Karnataka High Court, sheds light on the complexities and nuances involved in service tax disputes. The case revolves around a Review Petition filed by V.K. Niranjan And Co. challenging an order dated 11.02.2021, passed in C.E.A.No.21/2018. Let’s delve into the key aspects of the case.

Background and Facts: The Review Petitioner, a registered Chartered Accountant firm, was appointed as the internal auditor for Karnataka State Financial Corporation (KSFC), a State Government undertaking, in 2005. The firm engaged 45 individuals for audit work, and KSFC was obligated to pay salaries for these individuals. Delays in payments from KSFC led to delayed payments of service tax by the petitioner.

Show Cause Notices and Proceedings: The Department issued a show cause notice, alleging suppression of material facts and invoking the extended period of limitation under the Finance Act, 1994. The petitioner contended that the delay in payment was due to delays from KSFC and that they paid the service tax with interest as soon as the funds were received.

Despite the petitioner’s responses, a second show cause notice was issued, leading to an ex parte decision by the Additional Commissioner of Service Tax. The petitioner challenged the penalty imposed under Section 78 of the Act.

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