2010 (7) TMI 317 - AT - Service Tax

Manpower recruitment service - demand of service tax with interest - C.A. submits that as per the provisions of Section 73(3) of Finance Act, 1994, when the assessee has paid the service tax with interest before issue of show cause notice - Held that - assessee is clearly covered by the provisions of Section 73(3) was of Finance Act, 1994 - applying the provisions of Section 80 of Finance Act, 1994 - the appeal filed by the appellants is allowed by setting aside the penalty under Section 76 of Finance Act, 1994

Summary

Issues:
1. Imposition of penalty under Section 76 of the Finance Act, 1994 despite payment of service tax with interest before the show cause notice.
2. Applicability of Section 73(3) of the Finance Act, 1994 in the case.
3. Consideration of lenient view under Section 80 of the Finance Act, 1994 based on specific circumstances.

Analysis:
1. The appellants, engaged in providing manpower recruitment service, had paid the service tax for specific periods with interest before the show cause notice was issued. The penalty under Section 76 of the Finance Act, 1994 amounting to Rs. 71,307/- was imposed despite the timely payment. The learned C.A. argued that as per Section 73(3) of the Act, no show cause notice should have been issued once the tax with interest was paid. He referred to Tribunal decisions supporting this view, including cases like U.B. Engineering Ltd. v. CCE, Rajkot and Santhi Casting Works v. CCE, Coimbatore. The circular issued by the Board on 3-10-07 was also cited, emphasizing that further proceedings were not necessary after tax and interest payment.

2. The Tribunal, after considering the submissions, agreed with the appellant's argument. It noted that the show cause notice was issued after the tax payment and that the appellant fell within the purview of Section 73(3) of the Finance Act, 1994. The Tribunal also acknowledged the circumstances presented, such as the distance to the nearest bank and the nature of the appellant's business, as factors warranting a lenient view under Section 80 of the Act. Consequently, the appeal was allowed, and the penalty under Section 76 was set aside.

3. The judgment highlights the importance of complying with tax payment obligations and the legal provisions governing penalty imposition in cases where taxes are paid before the issuance of show cause notices. It underscores the significance of relevant precedents, circulars, and specific circumstances in determining the applicability of statutory provisions and the exercise of discretion in tax matters. The decision serves as a reminder of the need for procedural adherence and equitable considerations in tax enforcement actions.