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2017 (2) TMI 153 - AT - Service TaxClosure of proceedings u/s 73(3) of the FA, 1994 - imposition of penalty u/s 77 and 78 - the amount of Service Tax liability under the reverse charge mechanism along with interest, on being pointed out by the audit party, has been paid by the appellants - whether the provisions of Section 73(3) would directly apply the case in hand? Held that - The provisions of Section 73(3) are very clear, provides for non-issue of show-cause notice if Service Tax liability along with interest is discharged by the assessee on being pointed out by the Officer - Revenue authorities have misdirected themselves by wrongly issuing notice and not following the provisions of Section 73(3) in this case. Reliance placed in the case of COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX Versus M/s ADECCO FLEXIONE WORKFORCE SOLUTIONS LTD 2011 (9) TMI 114 - KARNATAKA HIGH COURT . Penalty set aside - appeal allowed - decided in favor of assessee.
Issues: Service Tax liability on services availed from group companies, penalties imposed under Section 77 and 78 of the Finance Act, 1994, applicability of Section 73(3) for closure of proceedings.
Analysis: 1. Service Tax Liability and Penalties: The appeal concerned the Service Tax liability on services availed from group companies during a specific period. The appellant accepted the error of non-discharge of Service Tax liability, paid the tax with interest, and availed CENVAT credit. The Revenue imposed penalties under Section 77 and 78 of the Finance Act, 1994, despite the appellant's compliance. The Tribunal noted that the appellant sought closure of proceedings under Section 73(3) of the Act, which was disregarded by the Revenue. The Tribunal highlighted that Section 73(3) clearly states that no show-cause notice should be issued if the Service Tax liability along with interest is discharged by the assessee. The Tribunal emphasized the misdirection by Revenue authorities in issuing the notice and failing to follow the provisions of Section 73(3). 2. Judicial Precedent: The Tribunal referred to a judgment of the Hon'ble High Court of Karnataka in a similar case, where it was held that if an assessee pays the service tax and interest before the issuance of a show-cause notice, authorities should not initiate proceedings for recovery of penalty. The High Court criticized the authorities for wasting time on taxpayers who promptly pay taxes with interest and emphasized the need for authorities to act in accordance with the law. The High Court stressed that no notice should be served against persons who have paid tax with interest, as expressly provided in Section 73(3) of the Act. 3. Decision: Considering the facts of the case and the judicial pronouncement by the High Court of Karnataka, the Tribunal held that the penalties imposed under Section 77 and 78 were unsustainable. The Tribunal set aside the impugned order to the extent it imposed penalties and disposed of the appeal accordingly. The Tribunal directed the Commissioner of Large Tax Payers Unit to issue a circular to all concerned authorities to ensure compliance with Section 73(3) of the Act, as highlighted in the judicial precedent. In conclusion, the Tribunal allowed the appeal, emphasizing the importance of adhering to statutory provisions and judicial interpretations to ensure fair treatment of taxpayers in matters of Service Tax liability and penalties.
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