2011 (3) TMI 173 - AT - Service Tax

Penalty - The respondent paid the tax along with applicable interest before issue of show cause notice - The argument of the Revenue is that the respondent had not paid penalty equal to 25% of the service tax amount prescribed under Section 73(1A) and therefore immunity available under Sections 76 and 77 cannot be granted - Section 73(1A) of the Finance Act 1994 provides for conclusion of adjudication proceeding in the cases of willful suppression/fraud/collusion if the taxpayer pays service tax liability along with interest and a penalty equal to 25% of service tax amount within a period of one month from the date of issue of SCNs - It is not open for the Revenue to say that penalty as applicable under Section 73(1A) is to be paid which has claimed benefit under Section 73(3) where show cuae notice is yet to be issued - Appeal is dismissed

Summary

Issues:
- Appeal against order in original passed by Commissioner of Service Tax, New Delhi.
- Imposition of penalty under Sections 76 and 77 of the Finance Act, 1994.
- Interpretation of Section 73(3) regarding payment of service tax and penalty.
- Application of CBEC Circular No.137/167/2006-CX-4 dated 3rd October, 2007.
- Conclusion of adjudication proceedings under Section 73(1A) and Section 73(3).
- Compliance with provisions leading to the conclusion of proceedings.

Analysis:
The judgment involves an appeal challenging an order passed by the Commissioner of Service Tax, New Delhi, concerning the imposition of penalties under Sections 76 and 77 of the Finance Act, 1994. The respondent had collected service tax but failed to remit it to the government account. However, before the issuance of a show cause notice, the respondent paid the tax along with applicable interest. The Commissioner, relying on Section 76(3) of the Finance Act, dropped the show cause notice for imposing penalties under Sections 76 and 77.

The crux of the issue lies in the interpretation of Section 73(3) of the Finance Act, 1994, which deals with the payment of service tax and penalties. The Revenue argued that since the respondent did not pay a penalty equal to 25% of the service tax amount as prescribed under Section 73(1A), immunity from penalties under Sections 76 and 77 should not be granted. On the other hand, the respondent contended that Section 73 does not mandate any penalty payment when service tax is paid in full with interest. The respondent also referred to CBEC Circular No.137/167/2006-CX-4 dated 3rd October, 2007, to support their argument.

The Circular mentioned clarifies the conclusion of adjudication proceedings under Section 73(1A) and Section 73(3), indicating that compliance with these provisions results in the conclusion of the entire proceedings under the Finance Act, 1994. It emphasizes that once the requirements of Section 73(1A) or Section 73(3) are met, the proceedings are deemed concluded. In this case, since it falls under Section 73(3), which does not entail any penalty, the Revenue's insistence on penalty payment under Section 73(1A) is unwarranted.

Ultimately, the Tribunal dismissed the Revenue's appeal, highlighting that Section 73(3) does not provide for penalties and that the Revenue should respect the provisions made in the law. The judgment underscores the importance of compliance with statutory provisions and the need for authorities to adhere to the established legal framework rather than seeking to impose additional penalties.