2014 (9) TMI 449 - HC - Service Tax

Jurisdiction u/s 73 - GTA service - Bar of limitation - Whether the show cause notices issued to the respondents, seeking to recover service tax under Section 73(1A) of the Finance Act, 1994, as amended with effect from 10.9.2004, for failure to pay service tax and file return as required by the proviso to Section 68(1) and 71A of the Finance Act, 1994, read with Rule 7A of the Service Tax Rules, 1994, could be sustained as within the period of limitation - Held that - Following decision of Commissioner of Central Excise v. Customs, Excise and Service Tax Appellate Tribunal and another 2014 (1) TMI 459 - MADRAS HIGH COURT - it is held that the Revenue has necessary jurisdiction under Section 73 of the Finance Act, particularly with reference to the limitation prescribed thereunder and the show cause notice issued on the second respondent/assessee is valid. However, the penalty imposed on the second respondent/assessee stands deleted and the prayer for cancelling the levy of interest stands rejected - Decided partly in favour of Revenue.

Summary

Issues Involved:
1. Interpretation of show cause notice under Section 73
2. Validity of show cause notice under amended Section 73 by Finance Act, 2004

Interpretation of show cause notice under Section 73:
The appeal challenged the Final Order passed by the Customs, Excise, and Service Tax Appellate Tribunal based on substantial questions of law. The key issue revolved around the interpretation of the show cause notice under Section 73. The Division Bench of the High Court had previously confirmed a demand by the department while removing the penalty imposed on the assessee. The court highlighted that Section 71A is a machinery section related to self-assessment procedures. It clarified that Section 73 allows the proper officer to serve a notice within one year from the relevant date to request the assessee to show cause for non-payment or short-payment of service tax. The court emphasized that Section 71A is not merely procedural and does confer jurisdiction on the authority to pass assessments. Additionally, the court examined the provisions related to penalties under Section 78 and emphasized the need to establish fraud or wilful misstatement for penalty imposition. It concluded that the penalty was not justified in the absence of such findings against the assessee.

Validity of show cause notice under amended Section 73 by Finance Act, 2004:
The High Court disposed of the appeal in line with the Division Bench's decision, confirming the Revenue's jurisdiction under Section 73 of the Finance Act. It held that the show cause notice issued to the assessee was valid, citing the limitation prescribed under Section 73. However, the court deleted the penalty imposed on the assessee based on the lack of evidence supporting penalty imposition. The prayer to cancel the levy of interest was rejected by the court. The judgment emphasized the distinction between interest and penalty, highlighting that interest is compensatory for delayed payment of tax, while penalty is punitive for deliberate violations. The decision aligned with previous rulings on the mandatory nature of interest payment under Section 75 of the Act. The court's verdict addressed the substantial questions of law raised in the appeal, answering them in accordance with the findings. No costs were awarded in this matter.

This detailed analysis of the judgment from the Madras High Court provides a comprehensive overview of the issues involved, the court's interpretation of the law, and the final disposition of the appeal.