2017 (5) TMI 148 - AT - Service Tax

Penalty u/s 78 of FA - Mining Services - The main contention of the appellant is that they are covered u/s 73(3) of the Act as they had paid the duty plus interest before issuance of SCN - Held that - Though the appellants paid the duty and interest after investigation begun, the fact remains that they did not make payment of Service Tax within the prescribed time and did not come forward to pay the due Service Tax on their own. They were not filing the prescribed returns nor declaring the taxable income by any declaration. In that manner we find that there has been continuous suppression during the entire period for which the demand has been issued - The appellants contention that section 73(3) is applicable in their case is not correct because provision of section 73(3) of Finance Act, 1994 are subject to the provisions of sub-section 4 of section 73 of Finance Act, 1994. Once, the ingredients of section 73(4) are present the provisions of section 73(3) are not applicable. Appeal dismissed - decided against appellant.

Summary

Issues Involved: Imposition of penalty under Section 78 of the Finance Act, 1994.

Detailed Analysis:

1. Background: The appellants provided 'mining services' to a company and did not discharge their Service Tax liability despite the services falling under the Service Tax net from a specific date. The Revenue initiated an investigation, and the appellants registered for Service Tax during the investigation. A show cause notice was issued for the demand of Service Tax, interest, and penalties.

2. Adjudication: The Commissioner confirmed the demand and imposed penalties under sections 76, 77, and 78 of the Finance Act, 1994. The appellants contested only the penalty under Section 78, claiming coverage under section 73(3) as they paid the duty plus interest before the show cause notice. They referred to a CBEC Circular and requested the invocation of section 80, citing various judgments.

3. Appellant's Contention: The appellants argued that they should be covered under section 73(3) and be entitled to the benefits of section 80. They relied on judgments related to non-issuance of show cause notice if interest is deposited and the applicability of section 73(3) in certain cases.

4. Revenue's Response: The Revenue reiterated the findings of the Order-in-Original and highlighted that the Commissioner had offered the appellants the option of a reduced penalty as per the law.

5. Tribunal's Decision: The Tribunal observed that the appellants collected payments for mining services but did not pay Service Tax or comply with registration requirements until after the investigation began. The appellants' argument of being covered under section 73(3) was dismissed as the provisions of section 73(4) were applicable due to continuous suppression. The Tribunal also rejected the applicability of Section 80 benefits as the appellants failed to show reasonable cause for non-compliance.

6. Precedent and Conclusion: The Tribunal cited a similar case where penalties were upheld, and the Commissioner's offer of a reduced penalty was noted. Consequently, the Tribunal found no merit in the appeal and dismissed it, upholding the penalties imposed by the Commissioner.

This detailed analysis outlines the key arguments, legal provisions, tribunal's findings, and the final decision regarding the imposition of penalties under Section 78 of the Finance Act, 1994 in the given judgment by the Appellate Tribunal CESTAT KOLKATA.