2017 (5) TMI 569 - AT - Service Tax

Penalty - VCES Scheme - non-payment of interest amount - appellant claims that they paid advance service tax under VCES and some extra amount to cover amount of interest - Revenue pointed out that the entire money was paid under the one head so it cannot be accounted as interest in Revenue s account - Held that - Though the liability of interest has not so far been quantified by the Revenue, the appellant deposited service tax as well as some excess amount in service tax head as mentioned by the Revenue - When the appellant is a Govt. corporation, who paid entire tax demand (through may be some interest still remains payable as it was not quantified by the Revenue), before issue of SCN and where intention to evade payment of tax cannot be alleged, then in the light of provisions of Section 73(3) and Section 80 of FA, 1994, no penalty is liable to be imposed on the assessee appellant - penalties set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeals against service tax demands, imposition of penalties under Section 78 of the Finance Act, 1994, non-payment of service tax on Goods Transport Agency (GTA) services, voluntary compliance under VCES, denial of VCES benefits, adjustment of excess paid amount against interest, High Court writ petitions, consideration of penalties and interest under VCES, non-imposition of penalty, quantification of interest, remand for interest quantification.

Analysis:

The judgment pertains to eight appeals filed by a government corporation against orders confirming service tax demands and imposing penalties under Section 78 of the Finance Act, 1994. The corporation was engaged in scientific extraction and sale of forest produce and availed services of transporters for transportation, falling under the category of "transportation of goods by road" liable for service tax.

The Revenue initiated inquiries regarding non-payment of service tax on GTA services by the corporation. The corporation opted for the Voluntary Compliance Encouragement Scheme, 2012 (VCES), depositing a substantial amount for service tax under VCES, including an excess amount to cover interest. However, the Revenue denied the benefits of VCES to the corporation, leading to disputes over the payment and adjustment of the excess amount against interest.

Subsequently, the corporation approached the High Court through writ petitions, challenging the denial of VCES benefits. The High Court directed authorities to consider penalties and interest in line with the Clarification on VCES. In the appellate proceedings, both parties presented arguments, with the Revenue emphasizing the non-payment of interest within the stipulated period.

The Tribunal, after evaluating the facts and submissions, concluded that penalties should not be imposed on the corporation under Section 73(3) and Section 80 of the Finance Act, 1994. The Tribunal noted the corporation's lack of intention to evade tax, prompt payment of dues upon notification, and the absence of a quantified interest amount from the Revenue. Citing the corporation's government status and the High Court's order, the Tribunal set aside the imposed penalties.

The Tribunal remanded the matter to the adjudicating authority solely for quantifying any remaining interest payable by the corporation. The judgment emphasized the corporation's proactive tax payment, absence of intent to evade, and the legal provisions governing penalties and interest under the Finance Act, resulting in the modification of the impugned orders and allowing the appeals on the grounds of non-imposition of penalties and pending interest quantification.