2015 (9) TMI 884 - AT - Service Tax

Penalty u/s 76 & 78 - Entire amount due paid before issuance of SCN - Held that - except for the first periodical return the appellant was showing the correct service tax liability in the returns and that amount available in the cenvat credit account was debited by the appellant after the end of each month. Once the correct duty amount is shown in the returns there cannot be any intention of evade payment of service tax which is also paid by the appellant before the issue of show cause notice alongwith interest. In view of the above there was reasonable cause for the appellant for not paying the entire service tax which was truly reflected in the periodical returns filed by the appellant - case was also covered by Section 73(3) of the Finance Act 1994 and there was no need to issue show cause notice in this case. Appellant is also eligible for the benefit of Section 80 of the Finance Act 1994. - Decided in favour of assessee.

Summary

Issues:
- Imposition of penalties under Section 76 and 78 of the Finance Act 1994 when the service tax has been paid along with interest before the issue of show cause notice.

Analysis:
The appeal was filed regarding the imposition of penalties under Section 76 and 78 of the Finance Act 1994, despite the appellant having paid the entire service tax leviable along with interest before the issuance of the show cause notice. The First Appellate Authority upheld the penalties, citing that tax amounts were collected from customers. The appellant's advocate argued that there was a delay in filing the first return due to financial difficulties, but subsequent returns were filed on time. The correct service tax liability was claimed by the appellant, and the cenvat credit account was promptly debited at the end of each month. The Revenue's representative contended that the appellant started filing returns only after the case was initiated by revenue officers, suggesting suppression to evade tax payment.

Upon review, it was noted that the appellant was registered with the revenue and consistently paid service tax. The appellant faced financial difficulties during the relevant period, leading to delayed payment of the first return, which was subsequently paid before the show cause notice was issued. The appellant accurately reported service tax liability in returns and debited the cenvat credit account accordingly. The Tribunal found that there was no intention to evade payment as the correct duty amount was reflected in the returns and paid along with interest before the show cause notice. The Tribunal determined that there was a reasonable cause for the delayed payment, covered under Section 73(3) of the Finance Act 1994, and the appellant was entitled to the benefits of Section 80 of the Act.

Based on these findings, the Tribunal allowed the appeal, concluding that the appellant had valid reasons for the delayed payment and had fulfilled their tax obligations in accordance with the law.