2016 (11) TMI 1157 - AT - Service Tax

Levy of penalty - service tax not discharged in time - BAS - Non-registration of appellant - Held that - reliance placed on the decision of the case of the case of CCE&ST LTU, Bangalore Vs. Addecco Flexione Workforce Solutions Ltd. 2011 (9) TMI 114 - KARNATAKA HIGH COURT where it was held that The assessee has paid both the service tax and interest for delayed payments before issue of show cause notice under the Act. Sub-Sec.(3) of Sec. 73 of the Finance Act, 1994 categorically states, after the payment of service tax and interest is made and the said information is furnished to the authorities, then the authorities shall not serve any notice under Sub-Sec.(1) in respect of the amount so paid. The imposition of penalty in the present case is unsustainable - appeal allowed - decided in the favor of appellant.

Summary

Issues:
Challenge to penalties under Sections 77 and 78 of the Finance Act, 1994.

Analysis:
The appellant challenged penalties imposed under Sections 77 and 78 of the Finance Act, 1994, for not taking service tax registration and not discharging their service tax liability as per an agreement with ICICI Bank Ltd. The appellant discharged the tax liability along with interest during the investigation. The original authority did not impose any penalties under Section 80 of the Act, but a revisionary authority later imposed penalties under Sections 77 and 78. The appellant appealed to the Tribunal.

The Department observed that the appellant was not paying service tax despite providing services to ICICI Bank and HDFC Bank as per agreements. The appellant got registered and paid the service tax due till December 2007. They submitted necessary documents and discharged the tax liability before the issuance of the show-cause notice. The Department issued a show-cause notice proposing penalties for deliberate deception to evade duty. However, as per Section 73(3) of the Finance Act, 1994, no show-cause notice should be issued when the tax along with interest is discharged, as established by a decision of the Karnataka High Court.

The Tribunal dismissed the appeals, emphasizing that authorities should not proceed against taxpayers who pay service tax with interest promptly. The Tribunal highlighted the importance of understanding the law's objective and not harassing compliant taxpayers. It directed the Commissioner of Large Tax Payers Unit to issue a circular to prevent contravention of Section 73(3) of the Act. Consequently, the Tribunal set aside the imposition of penalties, deeming them unsustainable, and allowed the appeal accordingly.