2009 (1) TMI 214 - AT - Service Tax

Interest and Penalty for delayed payment of Service Tax and delayed filing of Return - A combined reading of the above provisions would show that if the service tax with interest is paid by the assessee himself on the basis of his own assessment and if his assessment is wrong he pays the differential tax immediately on being pointed out by the Central Excise Officer the Central Excise Officer shall not issue a show cause notice to him for recovery of differential duty interest etc.. The sub-section (4) of Section 73 clearly provides that when duty has not been paid because of fraud/suppression/misdeclaration etc. or it involves contravention of any of the provisions of the law with an intention to avoid payment of service tax the provisions of sub-section (3) would not apply. - applicants have made out a strong prima facie case and accordingly stay petition is allowed

Summary

Issues:
Delay in payment of service tax, imposition of penalty under Section 76 of the Finance Act, applicability of Section 73(3) and Section 73(4) of the Finance Act.

Analysis:
The appellant faced scrutiny for delayed payment of service tax from April to September 2006, leading to a penalty of Rs.1,40,600 under Section 76 of the Finance Act. The appellant argued that as they paid the service tax with interest, the penalty was unjustified. The dispute centered on the applicability of Section 73(3) and Section 73(4) of the Finance Act.

The appellant contended that since they paid the full service tax with interest, albeit late, and rectified the shortfall promptly, no penalty should apply. The lower authorities rejected this argument citing the absence of a show cause notice under Section 73. However, the tribunal disagreed, emphasizing that Section 73(3) allows self-assessment and payment without a notice for the amount paid. Section 73(4) excludes cases involving fraud, suppression, or contravention from this provision.

The tribunal interpreted the provisions to mean that if the taxpayer pays the service tax and rectifies any errors upon detection, without fraudulent intent, no show cause notice is necessary. Consequently, since the appellant rectified the shortfall promptly, the imposition of penalty under Section 76 was deemed unwarranted. The tribunal allowed the stay petition unconditionally, finding a strong prima facie case in favor of the appellant.