A two-judge bench of the Delhi High Court has held that the delay in payment of service tax due to the operation of a Centralised System cannot be considered as a reasonable ground to escape from the penalty proceedings.
The appellant was a regular service tax assessee had not paid the entire service tax liability but only discharged a part thereof and also did not pay the amounts due in time. Consequently, it claimed that it was unable to discharge its tax liability on account of some internal difficulties. It was also claimed that the amounts were not available with it at the relevant time.
Assessee failed to secure relief from the lower authorities and the CESTAT, approached the High Court on appeal.
The division bench comprising Justices S Ravindra Bhatt and Prateek Jalan observed that the impugned order is justified and warranted in the circumstances.
“Whatever be the constraint, the assessee was faced with, it was duty bound to remit amounts collected by it towards service tax, in a planned manner, and as required by law. The deposit belatedly, by it, on the ground that the amounts were deposited on ad-hoc basis due to the operation of a centralized system, cannot be a legitimate excuse. What is evident is that the assessee/appellant withheld the amounts collected from the service recipient as a tax liability. As the remitter, assessee/appellant was duty bound to comply with the terms of the Finance Act and Rules, which prescribed not only the filing of returns but also a periodic deposit of these amounts. The delay in deposit of these amounts spanned over a period of two and a half years and therefore, amounted to misreporting of true and correct facts. To that extent, the Show Cause Notice was justified. The finding of misreporting too was warranted,” the bench said.
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