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Financial Difficulties not a Defense If Assessee failed to pay Service Tax Collected from Customers to Govt

In CENTRAL EXCISE APPEAL No. 46 OF 2019, M/s. Dilip Chhabria Design Pvt. Ltd. vs. The Commissioner of Central Excise Pune­-I, the appellant is engaged in providing taxable services such as Interior Decorator Services, Design Services, servicing of Motor Vehicle and Management Consultancy Services. It was found that the appellant had not  paid service tax from December 2011 onwards. Thus, the Show Cause Notice dated 25th February 2014 was issued demanding service tax along with interest and also imposing penalty. In its reply to the above notice, the appellant pointed out that they are not contesting the demand of service tax which has now been paid. However, non­payment of service tax was only because of its financial difficulty. It was further pointed out that in fact  there was no suppression as in its ST­3 Returns, they had always declared the quantum of the service tax payable, but not paid. However, the submissions did not find favour with thecCommissioner of Service Tax.

On appeal, the Appellant Tribunal held that under Section 78 of the Finance Act, 1994, equivalent penalty can be imposed in cases of willful mis­statement or suppression of facts or for contravention of any of the Act or Rules made thereunder with an intent to evade payment of service tax. In this case, it cannot be disputed that the appellant after having recovered the service tax from its customer had not paid over the amount to the State. Thus, undeniably they have contravened the Finance Act, 1994 and Rules made thereunder, which obliges the assessee to make over the payment to the Government before the specified date. This non­payment was certainly with intent to evade the service tax as there was no justification for keeping the amounts recovered from the customer with itself and not passing it over to the Government on whose behalf it is collected. The financial difficulties faced by the appellant can never justify the non- payment of tax to the Government. The above fact coupled
 with misrepresentation to its customers that the amount collected from them will be paid over to the Government, would clearly point to mala fide conduct on the part of the appellant. Therefore, we see no reason to interfere with the impugned order of the Tribunal.

The Bombay High Court found no reason to interfere with the above decision.

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