2009 (3) TMI 85 - AT - Service Tax

Failure to get registered with the department and pay service tax - mandap keepers service - service tax was paid with interest prior to the date of issue of the show-cause notice - request for waiver of penalty held that penalty otherwise imposable under Section 78, cannot be avoided on the ground that the duty amount was paid by the assessee prior to issuance of show-cause notice therefore, penalty imposed u/s 78 is sustained and the rest of the penalties are set aside - appeal allowed in part

Summary

Issues:
- Liability for non-payment of service tax on mandap keepers' service
- Imposition of penalties under various provisions of the Finance Act, 1994
- Applicability of penalties when service tax was paid before the show-cause notice

Analysis:

1. Liability for non-payment of service tax on mandap keepers' service:
The appellant was engaged in providing mandap keepers' service during a specific period, which was subject to service tax from a certain date. Despite this, the appellant did not pay the service tax on the amounts collected for the service nor did they register with the tax department. The authorities issued a show-cause notice proposing penalties under the Finance Act, 1994, after the appellant paid the service tax with interest during the investigation. The appellant argued they were unaware of the tax liability and requested a waiver of penalties. However, the original authority imposed penalties under various sections of the Act.

2. Imposition of penalties under various provisions of the Finance Act, 1994:
The penalties imposed on the appellant included Rs. 12,000 under Section 76, Rs. 7,000 under Section 77, and Rs. 24,000 under Section 78 of the Finance Act, 1994. The appellant appealed to the Commissioner (Appeals) but was denied relaxation under Section 80 of the Act, leading to the current appeal against the appellate Commissioner's decision.

3. Applicability of penalties when service tax was paid before the show-cause notice:
The appellant argued that since the service tax was paid with interest before the issuance of the show-cause notice, no penalties should be imposed. The appellant cited decisions supporting this argument, including a Bombay High Court ruling and various Tribunal decisions. However, the opposing view was based on a Supreme Court decision that penalties under Section 11AC of the Central Excise Act were mandatory even if the duty amount was paid before the notice. The Tribunal found that while penalties under Section 78 of the Finance Act, 1994 were upheld, penalties under Sections 76 and 77 were set aside based on previous Tribunal decisions where penalties were not imposed when the service tax was paid before the show-cause notice.

In conclusion, the Tribunal partially allowed the appeal by sustaining the penalty under Section 78 of the Finance Act, 1994, while setting aside the penalties under Sections 76 and 77. The judgment clarifies the applicability of penalties in cases where service tax was paid before the issuance of a show-cause notice, highlighting the distinction in treatment under different sections of the Act based on legal precedents and interpretations.