2014 (8) TMI 410 - AT - Service Tax

Levy of penalty where service tax and interest before issuance of SCN - Management, maintenance or repair services - Held that - A combined reading of paragraphs of Master Circular No. 97/8/2007-S.T., dated 23-8-2007 would show that even Board has no such intention that Show Cause Notice should be served to the assessee, who pays the Service Tax and interest before service of notice - penalty imposed on the appellant cannot be sustained and is required to be set aside - Decided in favour of assessee.

Summary

Issues:
- Appellant not paying Service Tax for services provided
- Invocation of provisions of Section 73(3) of Finance Act, 1994
- Imposition of penalty under Section 76
- Interpretation of statutory provisions and circulars
- Decision on setting aside the penalty

Analysis:

The case involved the appellant, engaged in providing management, maintenance, or repair services, who had not paid Service Tax for the services provided during a specific period. A Show Cause Notice was issued to the appellant after it was found that the tax had not been paid. The appellant contended that the entire amount, along with interest, was paid before the receipt of the Show Cause Notice, invoking Section 73(3) of the Finance Act, 1994, which states that no further action will be taken if the demanded amount is paid with interest before the notice is served.

The Chartered Accountant representing the appellant argued for the setting aside of the penalty under Section 76, emphasizing that the payment was made before the notice was received. The issue primarily revolved around the imposition of the penalty. The Tribunal considered waiving the requirement of pre-deposit and proceeded with the final decision on the matter, focusing on the penalty under Section 76.

During the hearing, both sides presented their arguments. The Advocate for the Respondent referred to a Master Circular to support the imposition of the penalty under Section 76, while the Chartered Accountant relied on the provisions of Section 73(3) of the Finance Act, 1994, to assert that the appellant had fulfilled the requirements by paying the amount before the notice was served.

The Tribunal examined the relevant provisions and circulars, including Para 9.1 and Para 12.1 of the Master Circular, which outlined the penalties and procedures for delay in payment of service tax. The Tribunal noted that the intention behind these provisions was to avoid serving a Show Cause Notice to an assessee who pays the Service Tax and interest before the notice is served.

Based on the interpretation of the statutory provisions and circulars, the Tribunal concluded that the penalty imposed on the appellant could not be sustained. Consequently, the appeal was allowed, and the penalty imposed under Section 76 of the Finance Act, 1994, was set aside, providing consequential relief to the appellant.