2010 (8) TMI 379 - AT - Service Tax

Under sections 76, 77 and 78 - Demand of interest and the penalties imposed - The respondents had wilfully suppressed the fact of providing taxable service and evaded the tax due; they wilfully failed to follow the statutory provisions - As per the ratio of the Apex Court judgment in the case of Union of India v. Rajasthan Spg. & Wvg. Mills (2009 -TMI - 33419 - SUPREME COURT OF INDIA), the liability to penalty under section 11AC of the Act did not stand excluded at the threshold for the reason that the assessee who was otherwise liable to pay interest under section 11AC had discharged the tax and the interest due before the issue of show cause notice. The ratio applied to similar penal provisions of the Act.

Issues:
Appeal filed by Revenue to vacate Commissioner (Appeals) orders, imposition of penalties under various sections of the Act, reliance on judicial authorities, applicability of penalty under section 11AC, payment of tax, interest, and penalties, deliberate evasion of service tax, vacating demand of interest and penalties, interpretation of legal provisions.

Analysis:

1. Imposition of Penalties under Various Sections of the Act:
The appeals filed by the Revenue sought to vacate the orders of the Commissioner (Appeals) which vacated the orders of the original authority imposing penalties under sections 76, 77, and 78 of the Act. The original authority found that the respondents had wilfully evaded payment of tax and did not follow statutory provisions, leading to the imposition of penalties along with the tax and interest due.

2. Reliance on Judicial Authorities and Applicability of Penalty under Section 11AC:
The Commissioner (Appeals) vacated the demand of interest and penalties based on the decision of the Tribunal in specific cases. However, the Revenue argued that the Commissioner had relied on decisions that were no longer considered good law. The Revenue contended that liability to penalty under section 11AC did not stand excluded merely on depositing the amount after being caught but before the issue of show cause notice, citing various judicial authorities to support their argument.

3. Payment of Tax, Interest, and Penalties - Deliberate Evasion of Service Tax:
The respondents, engaged in providing taxable services, had failed to follow statutory formalities such as paying the tax due and filing service tax returns during the material period. The original authority found that the respondents had wilfully suppressed the fact of providing taxable services and evaded tax due. Although the respondents paid the tax due along with applicable interest before the show cause notice, the original authority imposed penalties under sections 76 and 78 of the Act.

4. Vacating Demand of Interest and Penalties - Interpretation of Legal Provisions:
The impugned order vacated the demand of interest and penalties imposed under sections 76, 77, and 78 of the Act, as the respondents had discharged the service tax liability and interest before the issue of show cause notice. The Commissioner (Appeals) relied on previous Tribunal decisions, which were later argued to be no longer good law. The Tribunal set aside the impugned orders and allowed the appeals filed by the Revenue.

In conclusion, the judgment addressed various issues related to the imposition of penalties, reliance on judicial authorities, applicability of penalty under section 11AC, payment of tax, interest, and penalties, deliberate evasion of service tax, and the interpretation of legal provisions. The Tribunal ultimately set aside the impugned orders and allowed the appeals filed by the Revenue, emphasizing the importance of complying with statutory provisions and the liability to penalties under the Act.

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