2010 (7) TMI 313 - AT - Service Tax

Penalty - Appellant is a small tax payer - came forward to discharge its tax liability - there was a delay in defaulting the payment of tax due - Held that - appellant having discharged the tax liability with interest and also pleading made today that when the liability was discharged with interest, no show cause notice should have been issued - proper to waive the entire penalty levied on the appellant, when the case does not fall under Section 78 of the Finance Act 1994. Consequently, the Appellate Order is set aside

Summary

Issues:
1. Applicability of Amnesty Circular No. 18/04-S.T. for waiver of penalty.
2. Liability of penalty for delay in payment of tax.
3. Consideration of Section 73(3) of the Finance Act, 1994 for waiver of penalty.
4. Evaluation of gravity of show cause notice for penalty imposition.
5. Applicability of Section 78 of the Finance Act, 1994 for penalty imposition.

Analysis:
1. The appellant claimed coverage under Amnesty Circular No. 18/04-S.T., dated 23-9-04, seeking waiver of penalty after paying the entire tax liability with interest. The Tribunal noted that the Circular was a trade notice and did not aid the appellant's case, as their situation predated the Circular. The respondent also argued against the appellant's claim based on the Circular, leading to dismissal of its relevance.

2. Despite being a small taxpayer, the appellant promptly cleared their tax liability upon realization, indicating a lack of mala fide intent. The main issue revolved around whether the appellant should be penalized for delayed tax payment. The Tribunal considered the appellant's compliance with interest payments and the absence of mala fide intentions, leading to a decision to waive the penalty imposed, especially since the case did not fall under Section 78 of the Finance Act, 1994.

3. The appellant contended that as per Section 73(3) of the Finance Act, 1994, no show cause notice should have been issued once the tax liability was discharged with interest. The Tribunal agreed with this argument, emphasizing the importance of the gravity of the show cause notice dated 14-3-05 in deciding to waive the penalty entirely.

4. In conclusion, the Tribunal set aside the Appellate Order in favor of the appellant, considering their prompt tax payment upon realization, lack of mala fide intent, and the provisions of Section 73(3) of the Finance Act, 1994. The decision to waive the penalty was based on these factors and the absence of applicability of Section 78 of the Finance Act, 1994 in the case.