2010 (7) TMI 414 - AT - Service Tax

Recovery of service tax Assessee was providing service packing service and transport of goods by road service It failed to register itself and to pay service tax Adjudicating authority imposed penalties under section 76, 77 and 78 Assessee paid service tax along with interest before issuance of SCN Provision of section 73(3) brought into play and penalty, set aside

Summary

Issues Involved:
1. Imposition of penalties under sections 77 and 78 of the Finance Act, 1994.
2. Non-imposition of penalty under section 76 of the Finance Act, 1994.

Detailed Analysis:

1. Imposition of Penalties under Sections 77 and 78 of the Finance Act, 1994:
The assessee, a provider of packing service and transport of goods by road, failed to register and pay the appropriate service tax from 1-1-2005 to 31-12-2006. The Original Authority confirmed a demand of Rs. 3,55,832 under section 73(2) of the Finance Act, 1994, with interest of Rs. 40,736 under section 75, and imposed penalties under sections 76, 77, and 78. The assessee paid Rs. 3,46,456 along with interest before the show-cause notice was issued and the remaining Rs. 9,376 afterward. The assessee challenged the penalties, citing ignorance of law and immediate payment upon realization, supported by Board Circular F.No. 341/18/2004-TRU and various judicial precedents.

The Tribunal noted that the issue involved was regarding the payment of service tax on the Goods Transport Agency during a period of confusion about tax liability. The Tribunal referenced several cases, including Busy Bee v. CCE, where penalties were waived due to ignorance of legal provisions and reasonable cause for failure. Similarly, in R. Sukumar v. CCE, penalties were vacated due to the lack of mens rea or contumacious conduct and the newness of the service tax concept. The Tribunal concluded that the penalties under sections 77 and 78 were unwarranted as the assessee paid the service tax and interest before adjudication, invoking section 73(3) which allows for the conclusion of proceedings without penalties if dues are paid voluntarily.

2. Non-Imposition of Penalty under Section 76 of the Finance Act, 1994:
The revenue appealed against the non-imposition of penalty under section 76. The Tribunal upheld the first Appellate Authority's decision to set aside the penalty under section 76, referencing the same reasons for vacating penalties under sections 77 and 78. The Tribunal emphasized that the assessee's prompt payment of service tax and interest before adjudication proceedings justified the non-imposition of penalties, following the provisions of section 73(3) and relevant judicial precedents.

Conclusion:
The Tribunal set aside the penalties imposed under sections 77 and 78 of the Finance Act, 1994, and upheld the decision to not impose a penalty under section 76. The appeal by the revenue was rejected, and the assessee's appeal was allowed, confirming that no penalties were warranted given the circumstances and timely payment of dues.