2016 (11) TMI 1292 - AT - Service Tax

Imposition of penalty - CENVAT credit - availing of services of foreign company, M/s Granco Clark Inc., USA for maintenance and repair of capital goods installed in the factory at Mysore - suppression of facts - Held that I find that Section 73(3) is very clear as it says that if tax is paid along with interest before issuance of the show-cause notice, then in that case, show-cause notice shall not be issued. In this case, I find that the contention of the appellant that he bonafide believed that he is not liable to pay service tax but during the audit, the audit party informed him that he is liable to pay service tax, then he immediately paid the entire service tax along with interest. Except mere allegation of suppression, the Department did not bring any material on record to prove that there was suppression and concealment of facts to evade payment of tax. Consequently, in my opinion, the imposition of penalty under Section 78 of the Act is not justified and bad in law. Moreover, in the impugned order, the learned Commissioner (Appeals) has not recorded any finding on suppression of facts by the appellant with an intention to evade tax. In view of the above discussion, I set aside the impugned order. Appeal allowed - decided in favor of appellant-assessee.

Summary

Issues:
- Appeal against Order-in-Appeal No. 592/2012 dated 30.10.2012 passed by the Commissioner (Appeals), Mysore.
- Imposition of penalty under Section 78 of the Finance Act.
- Allegation of suppression of facts by the appellant.
- Interpretation of Sections 73, 76 & 78 of the Finance Act, 1994.
- Applicability of case laws in similar circumstances.

Analysis:
The appellant, engaged in the manufacture of Aluminium Extrusions, availed services of a foreign company for maintenance and repair of capital goods. Following a visit by preventive officers, the appellant paid service tax with interest before a show-cause notice was issued. The Department later imposed penalties under Sections 76, 77 & 78 of the Finance Act, 1994, leading to an appeal before the Commissioner (Appeals) and subsequently to the Tribunal. The appellant argued that penalty under Section 78 was unjustified as the tax had been paid before the notice, citing Section 73(3) of the Act and relevant case laws. The Department contended that the appellant suppressed facts regarding irregular Cenvat credit, justifying the penalty.

Upon examining the submissions and relevant provisions, the Tribunal noted that Section 73(3) prohibits issuing a show-cause notice if tax with interest is paid before the notice. The appellant, upon being informed of the tax liability during an audit, promptly paid the tax and interest. The Department failed to prove suppression or concealment of facts to evade tax, leading to the conclusion that the penalty under Section 78 was unwarranted. Additionally, the Tribunal observed that the Commissioner (Appeals) did not establish any intentional suppression of facts by the appellant. Consequently, the Tribunal set aside the impugned order, allowing the appeal of the appellant.

In conclusion, the Tribunal's judgment focused on the interpretation of Sections 73, 76 & 78 of the Finance Act, 1994, emphasizing the prohibition on issuing show-cause notices post-tax payment and the lack of evidence supporting suppression of facts by the appellant. The decision also highlighted the importance of case laws in guiding similar circumstances and ensuring fair application of legal principles.