2014 (6) TMI 206 - AT - Service Tax

Waiver of pre deposit - whether, when the entire service tax alongwith interest was paid by the appellant before the issue of show cause notice, there is a justification for imposing penalty - Held that - prima facie, when the entire service tax alongwith interest is paid and there is no invocation of extended period on elements of fraud / suppression / misstatement, etc. then no penalty is imposable. Appellant has, therefore, made out a good case for complete waiver of the penalty imposed. Accordingly, it is ordered that there will be stay on the recoveries of the penalty till the disposal of this appeal - Stay granted.

Summary

Issues: Stay petition for penalty imposition when service tax and interest paid before show cause notice.

Analysis:
The appellant filed a stay petition challenging the penalty imposed by the C.C.E. & S.T., Surat-I for an amount of Rs.48,16,872. The main issue revolved around whether the penalty was justified when the appellant had already paid the entire service tax along with interest before the issuance of the show cause notice. The appellant did not contest the merits of the case but argued that no penalty should be imposed since the tax and interest were paid before the notice was issued.

The appellant's counsel, Ms. Dimple Gohil, relied on CBEC Circular No.137/167/2006-CX-4, dated 03.10.2007, to support the argument that once the service tax and interest are paid before the show cause notice, the proceedings should be considered concluded, and no further penalty should be imposed. She also cited several case laws to strengthen the appellant's position.

On the other hand, Shri Jitendra Nair, representing the Revenue, defended the decision of the adjudicating authority to impose the penalty.

After hearing both sides and examining the case records, the judge, H K Thakur, noted that based on legal provisions and previous judicial decisions, when the entire service tax and interest are paid without any invocation of extended period due to fraud, suppression, or misstatement, then imposing a penalty is not warranted. Consequently, the judge ruled in favor of the appellant, granting a stay on the penalty recovery until the appeal is disposed of.