2008 (4) TMI 235 - AT - Service Tax

Interest and service tax have been paid even before the issue of SCN taking lenient view penalty under Section 78 can be limited to 25% of the service tax amount which has not paid and we are of the view that the penalty under all the other sections can be waived. Therefore; we modify the impugned orders by confirming the tax amount and also the interest. As regards the penalty we hold that in both the appeals the penalty under Section 78 is limited to 25% of the service tax amount

Summary

Issues involved:
Appeals filed against Orders-in-Appeal passed by Commissioner of Central Excise; Service tax liability under the Service Tax Amnesty Scheme; Imposition of penalties under various Sections of the Finance Act; Conflicting decisions on levy of penalty and demand of interest; Interpretation of Section 73(1A) of the Finance Act; Conclusion of adjudication proceedings.

Analysis:

1. Service Tax Liability and Penalties:
The appellants, being Service tax payers, availed the Service Tax Amnesty Scheme but were found to have not included the correct value of the taxable amount in their returns. This led to short levy, prompting the Revenue to issue show cause notices. Despite paying the service tax and interest before the notices were issued, penalties were imposed under Sections 75, 76, 77, and 78 of the Finance Act. The Commissioner (Appeals) upheld the penalties, citing suppression even during the amnesty scheme.

2. Conflicting Decisions and Legal Interpretation:
The Tribunal noted conflicting decisions on penalties and interest levied before the issue of show cause notices. The Department relied on a High Court decision justifying interest payment even pre-notice issuance. The appellants referenced a circular clarifying the conclusion of proceedings upon payment of tax, interest, and a 25% penalty within a month of notice issuance. The Tribunal emphasized the need to consider each case's facts and circumstances.

3. Conclusion of Adjudication Proceedings:
In light of the circular's clarification that paying tax, interest, and a 25% penalty within a month of notice issuance concludes adjudication proceedings, the Tribunal modified the orders. It limited the penalty under Section 78 to 25% of the service tax amount unpaid, waiving penalties under other sections. The appeals were partially allowed, confirming the tax and interest while adjusting the penalty imposition.

This detailed analysis of the judgment from the Appellate Tribunal CESTAT Bangalore highlights the issues, legal interpretations, conflicting decisions, and the ultimate conclusion reached regarding the penalties and interest in the case.