2017 (3) TMI 1680 - AT - Service Tax

Penalty u/s 76, 77 and 78 of the Finance Act, 1994 - SCN has alleged suppression of facts and was issued by invoking the extended period of limitation - Held that - There is no element of suppression on the part of the appellant in defrauding the service tax. On pointing out the mistake that the appellant is liable to pay service tax, the amount of service tax in question was deposited by the appellant with interest. Thus, in terms of sub-section (3) of Section 73 ibid, there was no necessity for issuance of show cause notice, only for imposition of penalty - appeal dismissed - decided against Revenue.

Summary

Issues:
- Appeal against dropping of penalty under Section 76, 77, and 78 of the Finance Act, 1994
- Interpretation of Section 80 for non-imposition of penalty
- Allegations of suppression of facts and extended period of limitation
- Applicability of Circular No.137/167/2006-CX-4 dated 03/10/2007
- Necessity of show cause notice for imposition of penalty

Analysis:
The case involves an appeal by the Revenue against the dropping of a penalty under Section 76, 77, and 78 of the Finance Act, 1994, in an order passed by the Commissioner, Service Tax, New Delhi. The Revenue argued that the dropping of the penalty was unjustified due to the allegations of suppression of facts and the invocation of the extended period of limitation. The Commissioner, in the impugned order, relied on Section 80 of the Act for not imposing the penalty and made specific findings regarding the nature of the entity involved, which was a government undertaking. The Commissioner noted that there was no deliberate withholding of information or suppression of facts, and the non-payment of tax was due to ignorance, with the mistake rectified promptly upon discovery.

Upon hearing both sides and examining the case records, the Tribunal found that there was no element of suppression on the part of the appellant in defrauding the service tax. It was observed that upon being informed of the liability to pay service tax, the appellant promptly deposited the amount in question along with interest. The Tribunal referenced Section 73(3) of the Act, which states that if the duty is deposited before the issuance of a show cause notice, no penal action is required. Therefore, the Tribunal concluded that there was no necessity for the issuance of a show cause notice solely for the imposition of a penalty.

Consequently, the Tribunal upheld the impugned order and dismissed the appeal filed by the Revenue. The decision was based on the absence of suppression by the appellant, the timely payment of the service tax upon notification, and the provisions of Section 73(3) of the Act. The judgment highlights the importance of prompt corrective actions upon discovery of tax liabilities and the implications of such actions on penalty imposition under the relevant legal framework.