2018 (7) TMI 2190 - AT - Service Tax

Levy of Penalty - delayed payment of service tax but the tax alongwith interest was paid before issuance of SCN - Applicability of Section 73(3) and Section 73(4) of Finance Act - HELD THAT - The SCN was issued for levy of service tax under Head of Business Auxiliary Service along with interest and penalty. Since the entire service tax as well as interest was paid before issuance of the show-cause notice, the provision of Section 73(3) would be squarely applicable and hence, penalty was set aside. It was further held by the adjudicating authority that since the assessee was under a bonafide belief regarding taxability, the question of invocation of Section 73(4) of the Act, does not arise. There are no infirmity in the impugned order and the same is sustained - appeal dismissed - decided against Revenue.

Summary

Issues:
1. Revenue's appeal against dropping demand of service tax.
2. Grounds of appeal by Revenue.
3. Respondent's submission and payment details.
4. Allegation of non-payment of service tax.
5. Application of limitation period.
6. Observations and decision of the adjudicating authority.
7. Applicability of penalty under Section 73(3) and Section 73(4).

Analysis:
1. The Revenue filed an appeal against the dropping of the demand of service tax by the adjudicating authority. The respondent assessee was engaged in providing taxable services and a show-cause notice was issued alleging non-payment of service tax. The Revenue appealed for the imposition of a penalty under Section 76, 77, and 78 of the Finance Act, 1994.

2. The Revenue reiterated the grounds of appeal, seeking to challenge the dropping of the demand for service tax by the adjudicating authority. The respondent-assessee, through their counsel, submitted that they had paid a significant amount of service tax but disputed the allegation of non-payment of service tax on a specific amount.

3. The respondent-assessee acknowledged providing "Business Auxiliary Service" during a certain period and made payments towards service tax. However, there was a discrepancy in the payment for a particular period, leading to the allegation of non-payment of service tax on that amount.

4. The adjudicating authority observed that the demand for service tax was raised after the lapse of one year from the date of receipt of relevant information. Since there was no evidence of suppression or malafide intent on the part of the assessee, the extended period of limitation could not be invoked for raising the demand. As a result, the demand was set aside due to being hit by limitation.

5. The adjudicating authority noted that the show-cause notice was issued for the levy of service tax, interest, and penalty. However, since the entire service tax and interest were paid before the notice, the penalty was set aside under Section 73(3). It was further held that since the assessee had a genuine belief regarding taxability, Section 73(4) of the Act was not applicable.

6. After hearing both sides and examining the appeal records, the Tribunal found no infirmity in the impugned order. Consequently, the appeal filed by the Revenue was dismissed, upholding the decision of the adjudicating authority.

7. The judgment highlighted the importance of adherence to limitation periods in tax matters and the significance of genuine belief in tax compliance to determine the applicability of penalties under relevant sections of the Finance Act, 1994.