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2017 (3) TMI 1105 - AT - Service TaxValidity of show cause notice - extended period of limitation - Whether the ingredients for resort to proviso to section 73(1) of FA, 1994 are present to obviate the contention that section 73(3) of FA, 1994 should have been resorted to for closing the matter? Held that - the service tax authorities did commence correspondence with the appellant for payment of remaining dues only following the admission in the service tax returns that the said amount was outstanding. In these circumstances, there can be no greater claim to candidness than that demonstrated by appellant and there is no justification for alleging, or finding, that they had suppressed or misdeclared any relevant material. With such admission of outstandings, intent to evade tax is also an allegation that would not sustain - The ingredients for invoking the extended period, and thus also penalty u/s 78 of FA, 1994, are clearly absent. This is a fit case of closure of the proceedings u/s 73(3) of FA, 1994, without any of the penalties, as tax and interest had been paid on ascertainment and communication from service tax authorities - appeal allowed - decided in favor of appellant.
Issues:
Appeal against penalty under section 78 of Finance Act, 1994. Analysis: The appellant, a provider of 'business auxiliary service,' had paid tax for the first three quarters of fiscal 2009 but failed to pay thereafter. After being addressed about the deficiency, they eventually paid the tax dues and interest. The notice leading to adjudication and appeal proceedings was issued subsequently. The appellant contended that they lacked knowledge of tax matters and paid less than the tax due on stipulated dates due to financial difficulties. They believed themselves to be secure under the cover of section 73(3) of Finance Act, 1994, as they had made good the entire tax and interest before the notice was issued. During the hearing, the Learned Counsel for the appellant and the Learned Authorised Representative referenced relevant legal precedents. The decision in Mohtamaan Industries case and the High Court decision in M/S IWI Crogenic Vaporization System case were cited, emphasizing that penalties should be imposed on assessees who collect tax but fail to deposit it with the Government. The tribunal noted that the appellant had paid all dues before the notice was issued, similar to the circumstances in the M/S IWI Crogenic Vaporization System case. In contrast, the Mohtamaan Industries case involved payment of tax dues only after the issuance of the order-in-original, and the appellant disputed the tax liability in appeal. Therefore, the decision in Mohtamaan Industries was deemed inapplicable in this case. The central question revolved around whether the conditions for invoking the proviso to section 73(1) of the Finance Act, 1994 were met to bypass the application of section 73(3) for closing the matter. It was established that the appellant had promptly addressed the outstanding dues following admission in the service tax returns, displaying candor and no intent to evade tax, unlike the situation in the M/S IWI Crogenic Vaporization System case. Given the circumstances, the tribunal found that the ingredients for invoking the extended period and imposing a penalty under section 78 of the Finance Act, 1994 were absent. Consequently, the proceedings were closed under section 73(3) without any penalties, as the tax and interest had been paid upon communication from the service tax authorities. Therefore, the appeal was allowed, and the penalty under section 78 of the Finance Act, 1994 was set aside.
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