2018 (5) TMI 32 - AT - Service Tax

Liability of Interest and penalty - short paid amount paid on being pointed out - Held that - On re-consideration of the records by the Audit, the differential service tax amount was required to be paid and which have been paid immediately after being pointed out by the audit - invoking Section 78 alleging suppression, misdeclaration etc, is unsustainable. Interest - Held that - since the service tax during the relevant period has not been paid by the appellant, therefore, interest under the appropriate provision is attracted - liability of interest upheld. Appeal allowed in part.

Summary

Issues Involved:
Whether appellant is required to pay interest on the service tax amount already paid and penalty under Section 78 of the Finance Act, 1994.

Analysis:
The appeal was filed against an order-in-appeal passed by the Commissioner (Appeals) of Central Excise, Ahmedabad. The main issue was whether the appellant needed to pay interest on the service tax amount already paid and a penalty under Section 78 of the Finance Act, 1994. The appellant contended that the amount was paid immediately after being noticed and was due to a bona fide mistake, thus penalty should not be imposed. The Revenue argued that interest and penalty were warranted since the amount was paid after being pointed out during an audit.

The Tribunal noted that the appellant had indeed paid less duty during a specific period, as pointed out by audit officers. The appellant argued that the underpayment was unintentional and due to an accounting error, as they had been regularly paying service tax. They maintained that all entries were transparent and no facts were concealed. The Tribunal agreed with the appellant's stance, observing that the payment was made promptly after being highlighted by the audit, and there was no intent to evade duty. Consequently, the Tribunal found that Section 78, which deals with suppression and misdeclaration, was not applicable. However, interest on the service tax was deemed appropriate. As a result, the Tribunal partially allowed the appeal by setting aside the penalty under Section 78 of the Finance Act, 1994.

In conclusion, the Tribunal ruled in favor of the appellant, acknowledging the prompt payment of the underpaid duty and the absence of any deliberate evasion. While interest was deemed payable, the penalty under Section 78 was overturned due to the circumstances surrounding the case.