2016 (1) TMI 395 - AT - Service Tax

Levy of penalty u/s 77 and 78 - appellant sought the benefit u/s/ 73(3) since it had already deposited the entire service tax objected by the Audit - Held that - the transaction was properly recorded in the books of account regularly maintained by the assessee/appellant.- the issue was interpretational of notification and exempt on provisions and no active concealment or contumacious conduct having been found on the part of the appellant - penalty imposed under section 77 and 78 of the Act set aside - Decided in favor of assessee.

Summary

Issues involved: Imposition of penalty equivalent to service tax under Section 78 of the Finance Act, 1994.

Analysis:
The appeal in this case was against an Order-in-Appeal passed by the Commissioner (Appeals) regarding the imposition of a penalty equivalent to service tax under Section 78 of the Finance Act, 1994. The appellant, a telecom company, was found to have not paid service tax on taxable services provided to customers in a Special Economic Zone (SEZ) and exempted services under the "Village Panchayat Yojna." The audit revealed discrepancies in the payment of service tax, leading to a show-cause notice demanding the unpaid amount along with interest and proposing penalties under Sections 77 and 78 of the Finance Act, 1994.

The appellant contended that no show-cause notice was required as they had already deposited the disputed service tax amount highlighted by the audit. They argued that there was no intent to evade tax as the transactions were properly recorded in their books of account. However, the Commissioner (Appeals) upheld the demand of service tax on exempted services and the penalty imposed, stating that although the tax was paid post-audit objection, there was a failure on the appellant's part.

Upon hearing both sides, the Tribunal found that the appellant had paid the tax promptly upon the revenue's notification, and the transactions were accurately recorded in their books. The Tribunal concluded that there was no contumacious conduct or intent to evade tax on the appellant's part. Consequently, the Tribunal allowed the appeal, setting aside the penalties imposed under Sections 77 and 78 of the Act. The Tribunal also deemed the joint penalty imposition as invalid, granting the appellant consequential benefits as per the law.