2013 (12) TMI 789 - AT - Service Tax

Demand of service tax - Penalty under Sections 76 & 78 - GTA Services - Suppression of duty - Held that - both the lower authorities have taken the view that mere non payment of service tax amounts to suppression and the circumstances under which omission/shortly be occurred have not been discussed and considered. Further, I also find that according to provisions of Section 73(3) of Finance Act, 1994, even if the amount was ascertained by audit party, if the assessee pays the amount before issue of show cause notice, unless suppression/fraud/collusion to evade duty has been found no show cause notice could have been issued. After going through the records, I find that both the lower authorities have not given enough justification for invoking suppression in this case. There was no need for issue of show cause notice and initiating proceedings against the appellant - Decided in favour of assessee.

Summary

Issues:
1. Non-payment of service tax leading to penalty under Sections 76 & 78 of Finance Act, 1994.
2. Nature of suppression of facts leading to penalty imposition.
3. Interpretation of Section 73(3) of Finance Act, 1994 regarding show cause notice issuance.

Analysis:
1. The Appellant had been paying service tax on GTA services since 2004 but failed to pay Rs. 34,279/- for the years 2004-2005 and 2006-2007, which was discovered during an audit in 2007-2008. The amount was paid with interest in January 2008. Subsequently, penalties were imposed under Sections 76 & 78 of the Finance Act, 1994, equal to the determined service tax liability. The issue revolved around the non-payment leading to penalty imposition.

2. The Appellant argued that there was no detailed discussion on the nature of suppression of facts by the lower authorities. They contended that the mere non-payment of service tax was not sufficient to establish suppression, especially considering the substantial amounts paid in other years. The Appellant maintained that they followed the accrual method for accounting and that the omission was due to clerical errors, not an intention to evade tax. The Appellant cited Section 73(3) of the Finance Act, 1994, which states that if an assessee pays the tax and interest before a show cause notice is issued, no such notice should be given. The Appellant claimed that since they paid before any notice, penalties should not have been imposed.

3. The Authority representing the Respondent argued that the Appellant failed to provide a satisfactory explanation for the non-payment, dismissing the claim of a clerical error. The Judge considered both sides' arguments and found that the lower authorities did not adequately discuss the circumstances leading to the omission of payment. The Judge also highlighted Section 73(3) of the Finance Act, 1994, emphasizing that unless there is evidence of suppression, fraud, or collusion, a show cause notice should not be issued even if the amount is identified during an audit. After reviewing the records, the Judge concluded that there was no justification for invoking suppression in this case. Consequently, the appeal was allowed, and proceedings against the Appellant were deemed unnecessary, providing consequential relief.

This judgment underscores the importance of thoroughly examining the circumstances surrounding non-payment of taxes before imposing penalties and the significance of complying with statutory provisions regarding the issuance of show cause notices.