2012 (10) TMI 490 - AT - Service Tax

Penalty imposed under Section 76 and Section 78 non-payment of service tax - appellant paid the full amount of service tax with interest before issue of show cause notice Held that - In the absence of any finding by both the lower authorities that service tax had been collected from all the customers, it cannot be said that there was deliberate intention to collect service tax and not to pay the same to the government.. Payment was made as soon as investigation was taken up, would show that this was a fit case for invocation of provisions of Section 73(3) of Finance Act, 1994 which provides that if service tax with interest is paid before issue of show cause notice, no further proceedings should be initiated penalty set aside

Summary

Issues:
1. Liability of the appellant to pay service tax.
2. Penalty imposed under Section 76 and Section 78 of the Finance Act, 1994.
3. Confusion regarding the payment of service tax by the receiver or provider.
4. Applicability of circular issued by TRU of C.B.E. & C.
5. Allegation of suppression and mis-declaration by the appellant.
6. Invocation of Section 73(3) of the Finance Act, 1994.
7. Interpretation of the provisions of Section 73(3) in the given case.

Analysis:
1. The appellant, engaged in providing taxable service of transport of goods by road, did not pay service tax from 1-4-2005 onwards. Upon investigation by the Revenue, the appellant paid the full amount of service tax with interest before the show cause notice was issued. There was no dispute regarding the liability of the appellant to pay service tax. The appeal was solely against the penalty imposed under Section 76 and Section 78 of the Finance Act, 1994, initiated after three and a half years of the investigation.

2. The appellant's representative argued that there was confusion from 1-4-2005 onwards regarding whether the service tax should be paid by the receiver or the provider. Referring to a circular issued by TRU of C.B.E. & C., the representative contended that the case fell under the circular's purview, and penal proceedings should not have been initiated. The representative also cited Tribunal decisions to support the waiver of penalty under Section 80 of the Finance Act, 1994, or the invocation of Section 73(3) of the same Act, emphasizing that the service tax was paid within one year.

3. The Revenue contended that the appellant's actions constituted suppression and mis-declaration, as they collected service tax after March 2005 but failed to remit it to the government. The Revenue argued that since the appellant paid service tax only for January to March 2005, the evasion of service tax was deliberate, justifying the imposition of a penalty. The matter was heard in detail, and with both sides' consent, the appeal was taken up for final disposal without pre-deposit.

4. The Tribunal considered the submissions from both sides and referred to the circular issued by the Board on 17-12-2004. The circular stated that penalties should not be imposed unless the default was due to deliberate fraud or other specified reasons. The Tribunal noted that the penalty was imposed on the appellant for collecting service tax from customers. However, it was unclear whether service tax was collected in all cases. The Tribunal emphasized that the appellant paid the full amount of service tax with interest promptly upon the investigation, indicating a lack of deliberate intention to evade payment. The Tribunal found that the provisions of Section 73(3) of the Finance Act, 1994 were applicable in this case, leading to the allowance of the appeal in favor of the appellant.

5. The Tribunal ruled in favor of the appellant, considering the circumstances and the application of Section 73(3) of the Finance Act, 1994. The appeal was allowed with consequential relief to the appellant, and the stay petition was also disposed of.