2015 (5) TMI 775 - AT - Service Tax

Penalty u/s 76 & 78 - short payment of service tax - Held that - that there is no such allegation on the appellant and the escapement of tax as alleged seems to be short paid due to some mis-calculation. We also find strong force in the contention raised by the representative of appellant that DGCEI which investigated the matter, did not come out with any short payment of service tax prior to April 2004. It was his submission that once in a year, the appellant themselves reconcile the statements and discharge the differential service tax liability short paid therein along with interest. - this is a fit case for invoking the provisions of Section 80 of the Finance Act, 1994 for setting aside the penalties imposed on the appellant herein. - Decided in favour of assessee.

Summary

Issues:
Recovery of service tax during April 2004 to August 2004; Imposition of penalties under Section 76 & 78 of the Finance Act, 1994.

Analysis:

Recovery of Service Tax:
The appellant filed a miscellaneous application to urge additional grounds of appeal not initially taken. The grounds were found to be in continuation of the appeal and legal in nature. The appeal was against an Order-in-Original regarding the recovery of service tax for the period April 2004 to August 2004. The appellant's premises were visited, and it was found that around Rs. 1.97 crore was short paid for this period across twenty-four branches. The appellant paid the tax liability and interest before a show-cause notice was issued. The adjudicating authority confirmed the demand, appropriated the deposited amount, and imposed penalties under Sections 76 & 78 of the Finance Act, 1994.

Imposition of Penalties:
The appellant contested the penalties, arguing that they had paid the entire tax liability before the show-cause notice was issued. The appellant's CA cited Section 73(3) of the Finance Act, 1994, which states that no show-cause notice shall be issued if the service tax liability is paid in full with interest. The appellant highlighted that only ten branches received show-cause notices, and there was no intention to evade tax. The departmental representative claimed there was an escapement of tax in all twenty-four branches. The Tribunal found that penalties were imposed as a deterrent measure, but there was no allegation of deliberate non-payment. The appellant reconciled statements yearly and paid any shortfalls with interest. The Tribunal applied Section 73(3) and set aside the penalties under Section 80 of the Finance Act, 1994, due to a reasonable cause for the short payment rectified before the notice was issued.

In conclusion, the Tribunal allowed the appeal, setting aside the penalties imposed on the appellant.