2011 (8) TMI 915 - AT - Service Tax

Penalty - security and detective services - in this case the service tax was paid on 7-12-2006 in respect of the quarter ending June 2006 and on 30-12-2006 in respect of quarter ending September 2006 and in both the cases service tax was paid before any show cause notice was issued - According to the Board s Letter F.No. 137/167/2006-CX-4 dated 3-10-2007 once the service tax due has been paid with interest before issue of show cause notice as provided in Section 73 discussed above no show cause notice can be issued - Decided in favor of the assessee

Summary

Issues:
1. Imposition of penalty under Section 76 & Section 77 of Finance Act, 1994 for delayed filing of ST-3 returns and late payment of service tax.
2. Interpretation of Section 73(3) of Finance Act, 1994 regarding payment of service tax before issuance of show cause notice.
3. Applicability of circular issued by the Board in relation to the payment of service tax before the issuance of show cause notice.
4. Justification for imposition of penalty in the absence of suppression of facts, mis-declaration, or fraud.

Analysis:

1. The appellant, engaged in security and detective services, faced penalty proceedings for delayed filing of ST-3 returns and late payment of service tax for quarters ending June 2006 and September 2006. The advocate argued that the service tax was paid before any show cause notice was issued, as per Section 73(3) of the Finance Act, 1994. It was highlighted that the full service tax amount with interest was deposited before the notice was served, thus questioning the imposition of penalties under Section 76 & 77.

2. The Tribunal examined the payment dates of service tax for the relevant quarters, which were made on 7-12-2006 and 30-12-2006, preceding the show cause notice issued on 30-7-2007. Referring to Section 73(3) of the Finance Act, it was noted that if the service tax is paid based on self-ascertainment before notice issuance, no show cause notice shall be served. As there was no suppression, mis-declaration, or fraud involved, the imposition of penalty under Section 78 was deemed unnecessary, aligning with the provisions of the law.

3. The advocate referenced a circular by the Board (F.No. 137/167/2006-CX-4, dated 3-10-2007) which stated that if service tax with interest is paid before the show cause notice, no such notice should be issued. This circular further supported the argument that when the law prohibits the issuance of a show cause notice, there is no basis for imposing penalties. Additionally, the Tribunal considered past judgments, such as the case of Nishchint Engineering Consultants Pvt. Ltd. v. C.C.E, Ahmedabad, to support the decision that penalty imposition was unwarranted in the present scenario.

4. Consequently, the Tribunal found no justification for the imposition of penalties in the absence of any deliberate wrongdoing or non-compliance. The appeal was allowed, providing consequential relief to the appellant based on the interpretation of Section 73(3) and the circular issued by the Board, along with the application of relevant legal precedents.

This detailed analysis of the judgment provides a comprehensive overview of the issues involved and the Tribunal's reasoning behind the decision, ensuring a thorough understanding of the legal aspects and implications discussed in the case.