2015 (11) TMI 520 - AT - Service Tax

Penalty u/s 76 - whether or not penalty can be imposed under the provisions of section 76 of the Act - Held that - In Shivas industrial Caterers India P.Ltd. v. Commissioner of Service Tax, Chennai- 2014 (1) TMI 1557 - CESTAT CHENNAI , it was observed that the allegation of the department that appellant being habitual offenders entire amount is to be recovered is not sustainable as there is no distinction between habitual and one time offenders under section 73 (3) of the Act. It was held therein that penalty under section 76 is not imposable when the service tax liability alongwith interest is discharged before issuance of show cause notice. - decisions squarely cover the issue in the present case. Accordingly, impugned order is set aside - Decided in favour of assessee.

Summary

Issues:
Challenge to imposition of penalty under section 76 of the Finance Act, 1994 for delayed payment of service tax along with interest.

Analysis:
The appellant challenged the penalty imposed under section 76 of the Finance Act, 1994 for delayed payment of service tax along with interest. The appellant contended that the penalty was illegal and unjustified despite discharging the service tax liability along with interest. The Department argued that penalty imposition is mandatory under section 76 for delayed tax payment, emphasizing the appellant's habitual delay in tax payment. The appellant, a public limited company, admitted the delays but highlighted that the tax liability was eventually discharged with interest. The appellant referred to Board Circular No.137/167/2006-CX-4 to support the argument that no penalty can be imposed if the tax along with interest is paid before the show cause notice. The appellant also cited relevant tribunal decisions to strengthen their case.

The crucial issue revolved around whether penalty under section 76 of the Act could be imposed despite the appellant discharging the service tax liability with interest before the show cause notice. The records showed intermittent delays in tax payment, but all dues were eventually paid with interest before any notice was issued. After hearing both sides, the judge acknowledged the appellant's compliance with tax payment and interest obligations before the notice. The judge cited Commissioner of Service Tax, Bangalore vs. Master Kleen and other tribunal decisions to support the appellant's argument that penalty cannot be imposed when the tax liability along with interest is discharged before the issuance of a show cause notice.

In Commissioner of Service Tax, Bangalore vs. Master Kleen, the High Court emphasized that if tax and interest are paid before the show cause notice, penalty imposition is unwarranted. Similarly, in other tribunal decisions like Shivas industrial Caterers India P.Ltd. v. Commissioner of Service Tax, Chennai and Jay Shipping v. Commissioner of Central Excise, it was established that penalty under section 76 is not applicable when the service tax liability along with interest is cleared before the issuance of a show cause notice. Based on these precedents, the judge set aside the impugned order and allowed the appeal, ruling in favor of the appellant.