2013 (1) TMI 682 - AT - Service Tax

Penalty u/s 77 and 78 - Service Tax collected but not deposit - Business Auxiliary Services - Renting of cranes to their clients - After certain period of time, the respondent paid the service tax along with interest - Assessee files ST -3 Return - Held that - The respondent has filed the ST -3 Return showing the service tax collected but not deposited. Therefore, as per provision of Section 73 (3) of the Finance Act, 1994 when the assessee has paid the service tax along with interest of their own and intimated to the department, therefore Show Cause Notice is not warranted - In favour of assessee

Summary

Issues involved:
Appeal against dropping of penalty under various Sections of the Finance Act, 1994.

Analysis:
The case involved an appeal filed by the Revenue against the dropping of penalty against the respondent under various Sections of the Finance Act, 1994 by the lower Appellate Authority. The Respondents were registered with the Service Tax department under the category of "Business Auxiliary Services" and were paying service tax on renting their cranes to clients. A change occurred when supply of Tangible Goods Service was made taxable from 16.5.2008. The respondent collected service tax from clients but due to financial crisis, did not remit it to the department. The respondent later paid the service tax along with interest after disclosing the non-payment through ST-3 Return. A Show Cause Notice was issued, and the adjudicating authority imposed penalties under Sections 77 and 78 of the Finance Act, 1994. The Commissioner (Appeals) dropped the penalty based on Section 73(3) of the Finance Act, 1994, leading to the Revenue's appeal.

The Revenue argued that the deliberate act of not remitting collected service tax warranted penalties, citing judgments from the Hon'ble High Court of Karnataka and another case. However, the Tribunal found these cases irrelevant to the current scenario. It was noted that the respondent had filed the ST-3 Return showing the service tax collected but not deposited, which triggered Section 73(3) of the Finance Act, 1994. As per this provision, when the assessee pays the service tax with interest and informs the department, a Show Cause Notice is not necessary, thus negating the need for penalty imposition.

In conclusion, the Tribunal found no issue with the lower Appellate Authority's decision and upheld it, rejecting the Revenue's appeal. The judgment highlighted the importance of compliance with statutory provisions and the significance of disclosing non-payment to the department to avoid penalties.

(Dictated and pronounced in open court)