2008 (3) TMI 695 - AT - Service Tax

Summary

Issues involved: Interpretation of penalty provisions u/s 76 and u/s 78 of the Finance Act in cases of delayed Service Tax payment.

Case Details:
1. ST/279/2007 - M/s.Tidewater Shipping Private Ltd. Vs. CST, Bangalore
- Impugned Order: RA No. 62/2007 dated 29.05.2007
- Penalty: Rs. 100/- for everyday u/s 76, Rs. 7,12,000/- u/s 78
- Date of payment of tax & interest: 28.05.2005
- Date of issue of SCN: 30.05.2005

2. ST/249/2007 - Mr. Madhusudan Balaji Vs. CST, Bangalore
- Impugned Order: RA No. 41/2007 dated 23.03.2007
- Penalty: Rs. 100/- for everyday u/s 76, Rs. 5,00,000/- u/s 78
- Date of payment of tax & interest: 19.03.2005
- Date of issue of SCN: 29.03.2005

3. ST/290/2007 - M/s. JBC ImpexVs. CST, Bangalore
- Impugned Order: RA No. 44/2007 dated 27.03.2007
- Penalty: Rs. 100/- for everyday u/s 76, Rs. 1,000/- u/s 77
- Date of payment of tax & interest: Prior to 30.10.2004
- Date of issue of SCN: 02.03.2005

4. ST/397/2007 - M/s. Macro Services Vs. CCE(A), Mangalore
- Impugned Order: OIA No. 193/2007 dated 29.08.2007
- Penalty: Rs. 51,004/- u/s. 76, Rs. 1,000/- u/s 77, Rs. 51,004/- u/s 78
- Date of payment of tax & interest: 30.06.2006
- Date of issue of SCN: 23.08.2006

Judgment Summary:
The Advocates argued that early payment of duty and interest before the Show Cause Notice eliminates the need for penalty, citing relevant case laws. Conversely, the SDR contended that there was no bona fide belief for non-payment, indicating tax evasion. However, upon review, the bench found that the appellants, upon realizing the oversight, promptly paid the Service Tax even before the issuance of the Show Cause Notice, as evidenced in the provided table. Referring to Section 73(3) of the Finance Act and a Board's Circular, it was established that penalty proceedings cannot be initiated if the tax and interest are paid voluntarily or upon departmental insistence. Consequently, the bench concluded that the penalties imposed were unwarranted, especially in cases where the appellants settled their dues before any formal notice. Thus, the impugned orders were set aside, and the appeals were allowed with any necessary relief.