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2017 (5) TMI 1089 - AT - Service TaxPenalty - appellant s plea is that as they have discharged service tax alongwith applicable interest for the whole period the matter should have been closed. Proceedings initiated after almost 18 months of their payment is not legally justifiable - Held that - the bar of Section 73 (4) was not discussed in the impugned order it would appear that the tax liability being spread over extended period has prompted the proceedings to be initiated against the appellant. We note that the longer duration of tax liability by itself will not bar closure of case u/s 73 (3). The bar for closure of case u/s 73 (3) will arise only in case where the ingredients like mis-statement suppression of act intention to evade tax or evidence are present. Such ingredients have not been categorically established in the impugned order - the case was fit for closure under the provisions of Section 73 (3) of the Act - appeal allowed - decided in favor of appellant.
Issues:
Service tax liability for commission received from a specific company during a certain period, imposition of penalties under Section 76 and 78 of the Finance Act, 1994, applicability of Section 73 (3) for closure of the case without further proceedings, justification of penalties imposed, interpretation of deliberate intention, suppression of fact, and willful statement in tax matters, rebuttable presumption of bonafide act for a public sector undertaking, entitlement of Cenvat credit by subsidiary unit. Analysis: 1. Service Tax Liability and Penalties: The appellant, engaged in refining petroleum products and acting as a canalizing agent, supplied crude to a company and received commission, leading to a service tax liability under the category of "business auxiliary service." The officers pointed out a tax liability of &8377;1,19,12,400 for the period 2005-2006 to 2008-2009. The appellant admitted the liability but claimed that the tax for the specific period was not paid due to a mistake, promptly paying it upon notification. The Original Authority confirmed the liability, imposed penalties under Sections 76 and 78, and appropriated the amounts already paid. 2. Applicability of Section 73 (3) and Justification of Penalties: The appellant argued that Section 73 (3) should apply for closure of the case without further proceedings since they paid the tax with interest promptly after notification. The appellant claimed the delay in payment was a bona fide mistake and should not attract penal provisions. The AR contended that the penalties were justified, considering the appellant's awareness of tax liability and failure to pay until prompted by an inquiry. The Tribunal noted that the appellant did not dispute the tax liability but contested the penalties imposed, arguing for closure under Section 73 (3). 3. Interpretation of Intention and Suppression: The Tribunal analyzed the grounds for initiating proceedings after a significant delay post-payment by the appellant. It found that the delay in payment, though admitted, did not establish deliberate intention, suppression of fact, or fraud. The Tribunal emphasized that the longer duration of tax liability alone should not prevent closure under Section 73 (3) unless specific elements like misstatement or intention to evade tax are present. It also noted the rebuttable presumption of bonafide act for a public sector undertaking and the entitlement of the subsidiary unit to Cenvat credit, indicating a lack of intentional tax evasion. 4. Judgment and Disposition: The Tribunal held that the penalties imposed were not justified, setting them aside, while upholding the tax liability with interest. It concluded that the case was fit for closure under Section 73 (3) and disposed of the appeal accordingly, emphasizing the lack of justification for initiating proceedings after the appellant's payment with interest. The Tribunal highlighted the importance of establishing specific elements like intention to evade tax for penal provisions to apply, especially considering the nature of the appellant as a public sector undertaking and the entitlement of the subsidiary unit to tax credits.
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