Penalty u/s 78 is leviable if tax recovered not paid & information of unpaid taxes not furnished in ST returns

 Brief of the case:

The CESTAT Ahmedabad in the case of Iwi Crogenic Vaporization System India held that The non-payment of recovered tax coupled with the fact of non-furnishing of the details in respect of unpaid part in periodical returns clearly establish the intention of assesse to evade the payment of service tax recovered. Therefore, in such a case penalty levied u/s 78 is sustainable in law.
Facts of the case:

During the course of investigation by the central excise officers it was found that the assessee company was not paying service tax on certain services as payable under Reverse charge mechanism. Accordingly a demand of Rs .34,06,598/- along with interest under sec 75 and also equivalent penalty u/s 78.

The entire service tax along with interest was paid before the issue of show cause notice(SCN). Therefore, the assessee contested the penalty levied that the non-payment was accepted and paid before issue of SCN.

The assesse approached to the CESTAT against the order of Commissioner imposing penalty.

Contention of the Assessee:

The service tax demanded was payable under reverse charge mechanism (RCM) of which the assessee is eligible to claim credit on actual payment in cash. This being the case the situation is revenue neutral , therefore, the intention to evade the payment of the service tax could not be established.

Since the intention was not to evade the payment of tax , the penalty levied under sec 78 is not tenable.

The reliance was placed on the decision of CESTAT Ahmedabad in the case of Bhagwati Caterers P. Ltd .

Contention of the Revenue:

The case of Bhagwati Caterers Pvt Ltd is not applicable because in the present case no financial hardships has been shown by the assessee resulting in delay of payment. Further, the service tax payable under RCM (remaining unpaid) has not been reported in the periodical returns filed by the assessee.

As a result of not reporting of such unpaid tax, the department has no track of amount of tax it deserve and by investigation only the department tracked the non-payment. Such failure coupled with the fact that assessee was also recovering same from the customers  clearly establish that there was intention to evade the payment of tax.

 Decision of the CESTAT:

It is clear that the assessee was duly aware of its liability to pay tax whether as a service provider or under RCM as it has been registered with the department for the same in the manner so required. Thus, it is not the case that assessee can claim ignorance of law.

The assessee has also not furnished the details of unpaid tax and value of taxable services in the quarterly returns. Department could detect non- payment of as a result of special investigation. Further, the assessee was shifting the burden of its tax liability by recovering the same from counter party.

Assessee has also not claimed any financial hardship for non-payment. Thus, the benefit of case relied by the assessee of Bhagwati Caterers P. Ltd could not be claimed.

In view of the above findings, there is no good reason to interfere with the findings of Commissioner. Accordingly, the penalty as imposed is upheld by concluding the intention of assessee was to evade the tax collected.

Appeal filed by the assessee is dismissed.