2015 (7) TMI 716 - AT - Service Tax

Penalty u/s 78 - whether penalty under Section 78 of the Finance Act, 1994 is required to be imposed upon the appellant who has paid the entire differential service tax liability before the same was detected by Revenue - Held that - Differential service tax amount was paid by the appellant before the date of visit of the audit officers. Only the interest amount was not paid by the appellant, which also was paid by the appellant before issue of snow cause notice - premises of the appellant in that case was searched on 10.03.2008 and the payments were made on 19.03.2008 and 31.03.2008. In the relied upon case law 2010 (6) TMI 200 - CESTAT, AHMEDABAD , the payments were therefore, made after the date of detection by the Revenue whereas, in the present case, the appellant paid the entire amount of service tax before it was detected by the department and the interest was also paid by the appellant as soon as pointed out by the audit. In the instant case no intention to evade payment of service tax can be attributed on the part of the appellant and penalty under Section 78 of the Finance Act, 1994 is not imposable - Decided in favour of assessee.

Summary

Issues involved:
1. Imposition of penalty under Section 78 of the Finance Act, 1994 on the appellant who paid the entire differential service tax liability before detection by Revenue.

Analysis:

Issue 1: Imposition of penalty under Section 78
The appellant filed an appeal against the order upholding the penalty imposed by the adjudicating authority under Section 78 of the Finance Act, 1994. The appellant, engaged in providing taxable services falling under Construction of Residential Complex services, disclosed an income to the Income Tax department before an audit. The appellant had already paid the differential service tax and interest immediately upon audit findings. The appellant argued that as the service tax amount was paid before detection by the department, their case fell under Section 73(3) of the Finance Act, 1994, and no show cause notice was required. The Revenue contended that the service tax was paid only after raids by the Income Tax department and certain income disclosure was needed for assessment under the Finance Act, 1994. The Tribunal examined the case records and previous judgments. It was noted that the appellant paid the entire service tax amount before detection by the Revenue, and interest was also paid promptly upon audit notification. The Tribunal distinguished a previous case where payments were made after detection, unlike in the present case where payments were made before detection. It was concluded that no intention to evade payment of service tax was evident, and thus, penalty under Section 78 of the Finance Act, 1994 was deemed inapplicable. Additionally, as the entire differential service tax and interest were paid before the show cause notice, the case for non-issuance of a show cause notice under Section 73(3) was established. Consequently, the appeal against the penalty imposition was allowed.

This detailed analysis of the judgment provides insights into the legal reasoning and application of relevant provisions in the context of the issues involved in the case.