The Hindu Business Line : Dragged to court for not paying Rs 1.61

A PENNY saved is a penny earned, said Benjamin Franklin. Penny is mighty, according to Samuel Grafton who said, "A penny will hide the biggest star in the Universe if you hold it close enough to your eye." Which is what, it appears, the taxman did in the LIC case that came up before the Kolkata Tribunal.

The dispute was about LIC not paying service tax fully. It had short paid Rs 2 and Rs 3 for August and September 2002 respectively. The company had obtained a favourable order when the dispute was at the level of the Commissioner (Appeals); but the Department challenged this. As the defendant against the Excise Department, LIC admitted the fact of "delayed payment of service tax by 490 days." LIC pointed out that the Department was wrong in the numbers: The short payment was of Rs 1.61 and not Rs 2 and Rs 3 for the two months August and September 2002.

LIC explained that the short payments arose due to "rounding off the paise to the nearest rupee (discarding the decimal figures from three decimal and onwards)". I'm sure the Department had been informed this earlier, in vain, though, because LIC was at the receiving end of a penalty that the taxman meted out. Indignantly, LIC informed how it had paid Rs 10 - in response to `such inequitable and unjust demand'.

LIC submitted that the Commissioner has the power to quash inequitable and unjust demand by waiving the penalty in appropriate cases. Tribunal Member M.P. Bohra's order dated June 26 notes that the alleged short payments resulted due to the rounding of the rupee to decimal system. "Therefore, it cannot be said that it was an intentional short payment of duty," said Bohra. "The Commissioner has ample power to waive the condition of penalty in appropriate case by virtue of Section 80," reads the order. "The Commissioner (Appeals) has rightly waived the penalty."

In the present case, service tax of Rs 5 and interest was deposited prior to the issuance of show cause notice, observed the Tribunal, and applied the decision in the Rashtriya Ispat Nigam Ltd case affirmed by the Supreme Court to rule that no penalty was imposable.

"Few people know so clearly what they want. Most people can't even think what to hope for when they throw a penny in a fountain," said Barbara Kingsolver. Not so in this determined fight, though the payoff doesn't seem commensurate with what should have been spent for the stationery used in the process, not counting the litigation expenses.

I wonder if the taxman is smarting from the adverse decision. But LIC may well remember a quote of Mary Landrieu: that a penny saved is not a penny earned if at the end of the day you still owe a quarter. Now, what's that saying about being penny wise and...

E&OE@TheHindu.co.in

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