2015 (1) TMI 896 - HC - Service Tax

Imposition of penalty - Intention to evade tax - Held that - Appellant has paid the taxes belatedly. However, the grievance of the appellant is entirely against the penalties imposed under Sections 76, 77 & 78 of the Act. Before the Tribunal, though the question of limitation was raised, no serious challenge against the payment of service tax is forthcoming. On facts, the Tribunal has concluded that there is no explanation as to the so called bona fide mistake. The Tribunal on facts has also concluded that it is not a case of bona fide mistake and has upheld the case of the Department. - Merely because the service tax in question is paid prior to the issuance of show cause notice, the assessee cannot be exonerated from payment of penalty. As has been held by the Apex Court in the case of UNION OF INDIA vs. RAJASTHAN SPINNING AND WEAVING MILLS reported in 2009 (5) TMI 15 - SUPREME COURT OF INDIA , any payment of the duty amount in question, whether before or after the show-cause notice has been issued, could not alter the penal liability under Section 11-AC of the Act. Section 11-AC of the Act appears to be pari materia with Section 78 of the Finance Act, 1994. - Decided against assessee.

Summary

Issues:
1. Liability for service tax and education cess for a specific period.
2. Imposition of penalties under Sections 76, 77, and 78 of the Central Excise Act.
3. Contestation of penalty imposition based on lack of intention to evade tax and bona fide mistake.
4. Payment of service tax before the issuance of show-cause notice.
5. Interpretation of Section 11-AC of the Act in relation to penal liability.

Analysis:
The judgment addressed the demand of &8377; 1,11,809 towards service tax and education cess for a particular period, initiated through a show-cause notice under Section 73 of the Central Excise Act, 1944. The appellant contested the penalty proposed, arguing that the non-filing of returns and non-payment of tax were due to a bona fide mistake and not intentional evasion. However, the Customs, Excise and Service Tax Appellate Tribunal upheld the penalties imposed under Sections 76, 77, and 78 of the Act, rejecting the appellant's contentions.

The Tribunal found that the appellant's delayed tax payments did not absolve them from penalties. Despite the tax being paid before the show-cause notice, the Tribunal concluded that there was no explanation for the alleged bona fide mistake. Citing the case of UNION OF INDIA vs. RAJASTHAN SPINNING AND WEAVING MILLS, the Tribunal highlighted that payment of tax before or after the notice does not alter penal liability under Section 11-AC of the Act, which is similar to Section 78 of the Finance Act, 1994.

The judgment emphasized that the mere payment of tax before the notice does not exempt the appellant from penalties, as the law mandates penal liability irrespective of the timing of tax payment. Consequently, the appeal was dismissed, affirming the Tribunal's decision and upholding the penalties imposed under the relevant sections of the Act.