2016 (6) TMI 677 - AT - Service Tax

Levy of penalty - ppellant had paid the service tax along with interest immediately on pointing out by the department and even before issuance of show cause notice. - Held that - , the Show cause notice has been issued after the prescribed period of time alleging suppression and proposing to impose penalty. Sub-section(3) of Section 73 of Finance Act, 1994, lays down that no notice shall be served if the service tax along with interest is paid and informed to the authorities. - the penalties imposed is not legally sustainable. - Decided in favor of assessee.

Summary

Issues:
Penalty for delay in payment of service tax.

Analysis:
The appellant, a registered dealer, was found to have short paid service tax on freight charges and commission on job work, leading to penalty imposition under Section 76 and 78 of the Finance Act, 1994. The appellant paid the entire service tax liability along with interest upon discovery by the department. The Original authority imposed penalties under both sections. The Commissioner(Appeals) later reduced the penalty under Section 78 on condition of timely payment. The appellant contested the penalty, arguing no willful suppression or misstatement of facts and citing judgments in support. The department contended willful suppression and upheld the penalty. The tribunal focused on whether the appellant's prompt payment of service tax precluded the issuance of a show cause notice under Section 73(3) of the Finance Act, 1994.

The tribunal noted that the appellant had paid the service tax along with interest immediately upon discovery by the department, as required under Section 73(3) of the Finance Act, 1994. Citing relevant case law, the tribunal emphasized that no notice should be served if the service tax and interest are paid promptly. The tribunal found the penalties imposed not legally sustainable based on the judgments cited and set them aside while confirming the demand for service tax and interest. The appeal was partly allowed with consequential reliefs, if any.

In conclusion, the tribunal ruled in favor of the appellant, setting aside the penalties imposed for delay in payment of service tax based on the appellant's prompt payment upon discovery and the legal provisions outlined in the Finance Act, 1994.