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2016 (3) TMI 307 - AT - Service TaxLiability to pay penalty under Section 78 of the Finance Act, 1994 - where service tax and interest has been paid - revenue neutral exercise - Held that - there cannot be any wilful intention to evade service tax because had the appellant knew that they are liable to pay, then they would have paid and claimed cenvat credit being manufacturer and it would have been a revenue neutral situation. Also the appellant paid the service tax - Therefore by relying on the decision of the Tribunal in the case of Dineshchandra R. Agarwal Infracon Pvt. Ltd. vs. CCE, Ahmedabad 2009 (10) TMI 395 - CESTAT, AHMEDABAD , HP State Forest Corpn. Ltd. vs. CCE, Chandigarh 2008 (7) TMI 350 - CESTAT NEW DELHI , Samtel Colour Ltd. vs. CCE, Jaipur 2007 (8) TMI 336 - CESTAT, NEW DELHI , Marudhamalai Murugan Industries (P) Ltd. vs. CCE, Salem 2009 (1) TMI 73 - CESTAT, CHENNAI , once the service tax and interest are paid, no penalty can be imposed. Invokation of extended period of limitation - Intention to evade payment of Service tax - Held that - when the appellant can take credit and utilize it further for the payment of tax, naturally they would not get any benefit by not paying such a tax and attract penal provisions of the law, so, there can not be any intention to evade tax. Therefore, as the appellant peis not disputing the liability to tax and they have paid the service tax along with interest uptodate, therefore extended period of limitation cannot be invoked. - Decided in favour of appellant
Issues:
- Liability to pay penalty under Section 78 of the Finance Act, 1994. Analysis: The appeal was filed against the order-in-appeal partially upholding the order-in-original passed by the Commissioner of Central Excise (Appeals). The appellant, engaged in manufacturing goods falling under Chapter 28 and 29 of the Central Excise Tariff Act, was audited in January and February 2008. During the audit, it was found that the appellant had paid advances to transporters for carrying raw material but failed to pay service tax on these advances. The appellant argued that they believed the liability to pay service tax was with the supplier and not them. They eventually paid the service tax and interest in 2009 after being demanded by the authorities. The adjudicating authority confirmed the demand, and the Commissioner (Appeals) upheld the demand but dropped the penalty under Section 76 and imposed the penalty under Section 78, leading to the current appeal. The appellant contended that they had a reasonable belief that the supplier paying the freight was liable to pay the service tax. They argued that there was no intention to evade tax as they eventually paid the service tax and interest, making it a revenue-neutral situation. The appellant also highlighted the exemption under Notification 1/2006-ST and their compliance with full payment of service tax without abatement. On the other hand, the learned AR supported the findings of the Commissioner (Appeals) and claimed that the extended period was rightly invoked due to the appellant's intention to evade service tax. After hearing both parties, the Tribunal focused on whether the appellant was liable to pay the penalty under Section 78 of the Finance Act, 1994. The Tribunal noted that the appellant had paid the service tax and interest, emphasizing the absence of any intention to evade tax. The Tribunal referenced previous cases to support the view that once the tax and interest are paid, no penalty should be imposed. The Tribunal found merit in the appellant's arguments, emphasizing that the extended period should not have been invoked. Considering that the appellant acknowledged the tax liability and paid the dues, the Tribunal invoked Section 80 of the Finance Act, dropping the penalty under Section 78. Consequently, the appeal was accepted, and the penalty under Section 78 was set aside. In conclusion, the Tribunal ruled in favor of the appellant, emphasizing the lack of intention to evade tax and the payment of the service tax and interest, leading to the dropping of the penalty under Section 78 of the Finance Act, 1994.
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