2018 (2) TMI 225 - AT - Service Tax

Refund of penalty - applicability of Section 11B of the CEA, 1944 - Held that - The penalty is crystallized only after an order is passed by the appropriate authority imposing penalty for failure to pay service taxobserving the reason for failure in discharging the service tax and role of the appellant - In the present case, the said amount was suo moto deposited by the respondent while discharging the service tax and interest, which in my view, cannot be designated or termed as penalty. At best, it could be considered as an extra payment made at the time of discharging the service tax liability with interest - appeal dismissed - decided against Revenue.

Summary

Issues:
1. Whether the amount paid as penalty along with service tax arrears and interest is refundable under Section 11B of the Central Excise Act, 1944?

Analysis:
The appeal was filed by the revenue against the order in appeal on the grounds that the Commissioner (Appeals) erred in holding the amount paid as penalty by the Appellant, along with service tax arrears and interest, as refundable. The Revenue contended that since there was no mention of refund of penalty under Section 11B of the Central Excise Act, the amount paid as penalty cannot be considered for refund. However, upon reviewing the records, it was found that the appellant had discharged the service tax arrears with interest and an amount mentioned as penalty, following retrospective legislation regarding renting of immovable property service. The penalty is usually imposed by an appropriate authority after a specific order, considering the failure to pay service tax and the role of the appellant. In this case, the amount was deposited by the respondent while paying service tax and interest, without a specific penalty order. The tribunal concluded that this amount cannot be designated as penalty but rather an extra payment made at the time of discharging the service tax liability with interest. Therefore, the appeal filed by the Revenue was dismissed.

This judgment clarifies the distinction between penalty and additional payment made while discharging service tax liability. It emphasizes that penalty is imposed through a specific order after assessing the failure to pay service tax, which was not the case here. The tribunal highlighted that the amount paid, termed as penalty, was actually an extra payment made at the time of clearing the service tax arrears with interest. The decision reinforces the importance of proper imposition of penalties by the appropriate authority and the criteria for determining such penalties. The tribunal's analysis provides clarity on the refundability of amounts paid under different categories, ensuring adherence to the provisions of the Central Excise Act.