2015 (7) TMI 1043 - AT - Service Tax

Penalties under Section 76, 77 & 78 - entire service tax along with interest and 25% penalty was paid by the appellant before the issue of Show Cause Notice - Held that - It is a case of the appellant that penalties in excess of 25% penalty paid under Section 78 of the Finance Act, 1944 are not imposable, when the same has been paid before the issue of Show Cause Notice alongwith duty and interest. It is observed that as per Para 4 of O.I.A Dated 28.02.2013, passed by the first appellate authority, the entire amount of service tax alongwith interest and penalty of 25% was paid by the appellant during investigation. Under the provisions of Finance Act, 1944 when the entire amount of service tax alongwith interest and 25% penalty is paid before the issue of Show Cause Notice then there is no need to issue a Show Cause Notice. This means that no other penalty in excess of 25% penalty paid before issue of Show Cause Notice is imposable under Finance Act, 1944. In view of the above observations penalties imposed under Section 76, 77 and in excess of 25% under Section 78 of the Finance Act, 1944 are required to be set-aside and appeal filed by the appellant is required to be allowed to that extent. - Decided partly in favour of assessee.

Summary

Issues:
1. Delay in filing appeal and condonation of delay application.
2. Imposition of penalties under Section 76, 77, and 78 of the Finance Act, 1944.

Analysis:
1. Delay in filing appeal and condonation of delay application:
The appellant filed an appeal regarding O.I.A No. PJ/520/VDR-II/2012-13 Dated 28.02.2013. The appellant argued that the advocate failed to inform them about the outcome of the appeal, and they only became aware of the O.I.A on 19.01.2015. The appellant claimed to have filed the appeal within one month from receiving the letter on 19.01.2015 along with a condonation of delay application. The appellant also submitted an affidavit dated 06.04.2015 explaining the delay, which was accepted, and the delay was condoned.

2. Imposition of penalties under Section 76, 77, and 78 of the Finance Act, 1944:
The appellant contended that since the entire service tax, interest, and a 25% penalty were paid before the issuance of the Show Cause Notice, penalties under Section 76, 77, and 78 of the Finance Act, 1944 were not applicable. The Revenue confirmed that the appellant had indeed paid the entire service tax, interest, and 25% penalty before the Show Cause Notice was issued. Upon reviewing the case records, it was observed that when the entire amount was paid before the issuance of the Show Cause Notice, no further penalties beyond the 25% penalty were imposable under the Finance Act, 1944. Therefore, penalties imposed under Section 76, 77, and any excess penalty under Section 78 were deemed unnecessary and were set aside. The appeal was allowed based on these observations.

In conclusion, the appeal was allowed in favor of the appellant concerning the non-imposition of penalties beyond the 25% penalty paid before the issuance of the Show Cause Notice, in accordance with the provisions of the Finance Act, 1944.