2010 (11) TMI 426 - AT - Service Tax

Penalty u/s 76 - GTA service -The appellant was required to pay service tax as a recipient of GTA service and since they were not aware of this requirement, the service tax had not been paid - The appellant paid service tax on their own even though after some delay and filed the returns and during the scrutiny of the return only it was found by the department that there was delay in payment of service tax and hence the proceedings have been commenced and penalty has been imposed. Held that the Central Board of Excise & Customs in the Circular No. 137/167/2006-CX-4 dated 3-10-07 has stated that in view of the provisions of Section 73(3), where service tax with interest is paid before issue of show cause notice no show cause notice should be issued - Hence,impugned order of penalty is set aside.

Summary

Issues:
1. Imposition of penalty under Section 76 of Finance Act, 1994 for delayed service tax payment.
2. Applicability of Section 73(3) of Finance Act, 1994 regarding issuance of show cause notice.
3. Interpretation of circular No. 137/167/2006-CX-4 dated 3-10-07 by the Central Board of Excise & Customs.
4. Precedents set by earlier decisions of the Tribunal in similar cases.

Analysis:
1. The appellant faced a penalty under Section 76 of the Finance Act, 1994, amounting to Rs. 3,43,958, due to delayed payment of service tax. The issue revolved around whether the penalty was justified considering the circumstances of the case.

2. The appellant argued that they paid the service tax promptly upon realizing their obligation as recipients of GTA services, even before the show cause notice was issued. They contended that Section 73(3) of the Finance Act, 1994, should preclude the issuance of a show cause notice in such a scenario. Additionally, they referenced Circular No. 137/167/2006-CX-4 dated 3-10-07 and a previous decision of the Tribunal to support their position.

3. The Tribunal acknowledged that the service tax was indeed paid by the appellant before the issuance of the show cause notice, based on their own initiative. The Tribunal also considered the circular issued by the Central Board of Excise & Customs, which emphasized that in cases where service tax with interest is paid before the show cause notice, such a notice should not be issued. Consequently, the Tribunal allowed the stay petition and proceeded to make a final decision on the appeal.

4. The appellant's proactive approach in paying the service tax, albeit with a delay, and the subsequent scrutiny by the department leading to the imposition of a penalty were central to the case. The Tribunal recognized the relevance of earlier decisions and the circular in similar contexts, highlighting that penalties may not be warranted in situations where the tax is paid before the show cause notice. By citing the precedent set by the Tribunal in a specific case, the impugned order imposing the penalty was overturned, and the appeal was allowed in favor of the appellant, granting them consequential relief.