2012 (6) TMI 121 - AT - Service Tax

Non-payment of service tax on account of ignorance and not on account of any suppression, fraud etc - payment of part tax before issue of SCN - Plea for waiver of penalty u/s 78 - waiver of penalty u/s 73(3) - benefit of cum-tax value - Held that - Since assessee has promptly discharged tax liability together with interest even though they have separately not collected the tax amount from their customers and since there is no evidence of fraud, suppression etc., on their part, they can be given benefit u/s 73(3) to the extent the tax and interest has been paid by them prior to the issue of SCN, as the total amount paid by them towards tax and interest may be appropriated. Regarding payment made subsequent to the issue of SCN - Held that - Since appellants were not given an option to pay 25% of penalty amount they may be allowed to pay 25% of the penalty amount within 30 days from the date of re-quantification of the tax amount. Order is set aside and the matter is remanded to the original authority for passing a fresh order for reworking the tax, interest and penal liability.

Summary

Issues:
1. Calculation of service tax demand and interest.
2. Payment of tax amount before and after the issue of show cause notice.
3. Penalty imposed under Section 78 of the Finance Act, 1994.
4. Adjustment of amounts paid by the appellants against tax, interest, and penal liability.

Analysis:

Issue 1: Calculation of service tax demand and interest
The Ld. Advocate for the appellants argued that the appellants had paid the entire service tax demand and interest, with a balance amount of Rs. 42,000 deposited after filing the appeal before the Tribunal. The contention was that the value realized by the appellants should be treated as cum-tax value for tax calculation. The Tribunal found this argument reasonable, especially considering the promptness of the appellants in discharging their tax liability. The Tribunal acknowledged that the appellants had paid Rs. 3,42,788 before the show cause notice, and there was no evidence of fraud or suppression. Therefore, the appellants were given benefit under Section 73(3) of the Finance Act, 1994.

Issue 2: Payment of tax amount before and after the issue of show cause notice
The Tribunal noted that the appellants had not been given the option to pay 25% of the penalty amount after the issue of the show cause notice. Citing a judgment, the Tribunal allowed the appellants to pay 25% of the penalty within 30 days from the re-quantification of the tax amount. The re-quantification was deemed necessary to consider the appellants' claim that they had not collected any tax amount separately from their customers. The Tribunal emphasized the need for factual verification of this claim.

Issue 3: Penalty imposed under Section 78 of the Finance Act, 1994
The Ld. Advocate requested a lenient view on the penalty imposed under Section 78, citing the appellants' ignorance rather than any intention to evade taxes. The Tribunal considered the arguments from both sides and found the prayer for leniency not unreasonable, given the appellants' prompt payment of tax and interest upon realizing their tax liability. The Tribunal agreed to allow the appellants to pay 25% of the penalty amount within a specified timeframe.

Issue 4: Adjustment of amounts paid by the appellants
The Tribunal accepted the Ld. Advocate's prayer that the amounts already paid by the appellants should be adjusted against their tax, interest, and penal liability to be reworked. Consequently, the impugned order was set aside, and the matter was remanded to the original authority for passing a fresh order in line with the Tribunal's directions. The appeal was allowed by way of remand, ensuring a fair reworking of tax, interest, and penal liability.

In conclusion, the Tribunal's decision favored the appellants, acknowledging their promptness in addressing their tax liability and directing a reworking of tax, interest, and penal liability in a fair manner.