2013 (7) TMI 488 - AT - Service Tax

Penalty - Relief u/s 73(3) - whether Commissioner (appeal) is right in concluding that service tax along with interest has been paid prior to the a issue of Show Cause Notice along with some portion of interest Commissioner (Appeal) had misinterpreted the CESTAT order and the judgement of Nischint Engineering Consultant Pvt. Ltd Vs. Commr. Of C. Ex., Ahmedabad (2010 2010 (5) TMI 90 - CESTAT, AHMEDABAD) both - Order clearly states that Show Cause Notice ought to have been issued after tax has been paid with interest - interest on delayed payment amounting to ₹ 771/was not paid before issue of Show Cause Notice (4.3.2008). - Commissioner (Appeal) was not correct in dropping penalty as requirement of Section 73 was not fulfilled - no justification in dropping the penalty - Order of commissioner (Appeal) set aside appeal decided in favour of revenue.

Summary

Issues:
1. Imposition of penalty under Section 76 of the Finance Act 1994 for short payment of service tax.
2. Interpretation of Section 73 of the Finance Act 1994 regarding payment of service tax and interest before the issuance of Show Cause Notice.

Analysis:
1. The Commissioner (Appeal) observed that the appellant had short-paid service tax, but had paid the amount along with interest before the issuance of the Show Cause Notice. Consequently, the penalty of Rs. 2,36,478 imposed under Section 76 was dropped by the Commissioner (Appeal).

2. The Department filed an appeal against the Commissioner (Appeal) order, arguing that the reliance on case laws and circulars was incorrect. The Department contended that the appellant had only paid the service tax before the Show Cause Notice, without paying the interest due. This, according to the Department, did not fulfill the requirements of Section 73 for exemption from penalty.

3. The Tribunal analyzed the facts and relevant provisions, including the CBEC Circular and the case law of Nischint Engineering Consultant Pvt. Ltd. The Tribunal noted that while the service tax and part of the interest were paid before the Show Cause Notice, a portion of the interest was paid after the notice was issued. This led the Tribunal to conclude that the Commissioner (Appeal) had erred in dropping the penalty as per Section 73 requirements.

4. The Tribunal also found no justification for dropping the penalty imposed for delayed payment of service tax under Section 76. Consequently, the Tribunal accepted the appeal filed by the revenue, setting aside the Commissioner (Appeal)'s order and restoring the original order.

Conclusion:
The Tribunal's decision highlighted the importance of complying with the provisions of Section 73 of the Finance Act 1994, emphasizing that payment of service tax along with interest before the issuance of the Show Cause Notice is crucial to avoid penalties. The judgment serves as a reminder of the legal requirements regarding the payment of service tax and interest in such cases.