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2011 (9) TMI 830 - AT - Service TaxBelated payment of service tax penal action on the ground of failure to pay tax within due dates specified under Section 68 of the Finance Act Held that - penalty for failure to pay tax in time does not arise when the service tax has been paid together with interest after a delay, and that show cause notice under Section 73 of the Finance Act, 1994, cannot be issued for imposition of penalty in such a situation, in the light of Tribunal s order in Santhi Casting Works (2008 - TMI - 33121 - CESTAT CHENNAI - Service Tax). Penalty set aside and appeal allowed
Issues: Penalty waiver for failure to pay service tax on time.
In this judgment by the Appellate Tribunal CESTAT, Chennai, the issue revolved around the waiver of a penalty of Rs. 10,43,582/- imposed on the assessees under Section 76 of the Finance Act, 1944 for failure to pay service tax on time. The assessees, engaged in providing services related to computer graphics, digital intermediate processing, and registered under the category of "Photography Services," had paid the service tax belatedly along with interest for the period April 2007 to February 2008. A Show Cause Notice was issued for penal action based on the delay in payment, leading to the imposition of the penalty by the Commissioner. The Tribunal decided to hear and decide the appeal without predeposit of the penalty, as the issue stood settled by previous decisions of the Tribunal. The Tribunal agreed with the assessees' contention that the penalty for failure to pay tax on time does not apply when the service tax has been paid along with interest, even if there was a delay. Citing previous decisions such as Santhi Casting Works Vs. CCE, Coimbatore and U.B. Engineering Ltd. Vs. CCE, Rajkot, the Tribunal highlighted that no show cause notice under Section 73 of the Finance Act, 1994 can be issued for imposing a penalty in such situations. Referring to the CBEC Circular No. 137/167/06-CX-4 dated 03.10.2007, which clarifies that no show cause notice is required if tax liabilities are paid with interest, the Tribunal set aside the penalty imposed by the Commissioner and allowed the appeal. The order was pronounced and dictated in the open court, providing relief to the assessees in this case.
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