2018 (5) TMI 323 - AT - Service Tax

Levy of Penalty u/s 78 - correct value was declared in the ST-3 return but service tax was not paid - short paid service tax with interest paid before issuance of SCN - invocation of Section 73(3) of FA - whether the penalty imposed under Section 78 upon the appellant is legal and correct? - Held that - From the facts available on record and submissions by both sides it is found that though the appellant have not paid the Service Tax in time but they have correctly declared the value of the service provided including those value which was escaped from payment of Service Tax. Therefore when the correct value was declared intention to evade Service Tax is not established against the appellant. Accordingly the ingredients available for imposing penalty under Section 78 do not exist. If these be so the appellant was clearly entitled for none issuance of show-cause notice by the Revenue in terms of Section 73(3) of the Finance Act 1994. The appellant have not suppressed any fact by declaring the correct value in the ST-3 return their case is covered by Section 73(3). In the present case the appellant though collected the Service Tax from their client but they have clear intention to pay the Service Tax as correct value declared in the ST-3 return. Therefore merely because the Service Tax was collected the ingredient available under Section 78 does not get attracted. Appeal allowed - decided in favor of appellant.

Issues involved:
1. Appellant short paid Service Tax amount.
2. Imposition of penalty under Section 78.
3. Appellant's declaration of correct value in ST-3 return.
4. Application under Section 73(3) for settling the case.
5. Allegation of malafide on the part of the appellant.
6. Interpretation of Sections 73(3) and 73(4) of the Finance Act, 1994.

Analysis:

1. The appellant was engaged in providing taxable services and had short paid the Service Tax amount. The appellant paid the unpaid amount along with interest before a show-cause notice was issued. The issue was whether the penalty imposed under Section 78 was legal and correct.

2. The appellant contended that they had declared the correct value in the ST-3 return, indicating no intent to evade Service Tax. The appellant argued that they were entitled to immunity under Section 73(3) as they had paid the Service Tax before the show-cause notice was served. The appellant relied on a specific judgment to support their case.

3. The Revenue argued that the appellant had collected Service Tax but not deposited it to the government, alleging malafide intentions. The Revenue cited several judgments to support their position.

4. The Tribunal considered both sides' submissions and found that the appellant had declared the correct value, negating any intent to evade Service Tax. The Tribunal noted that the appellant had applied for settlement under Section 73(3) before the show-cause notice was issued, entitling them to immunity. Therefore, the Tribunal held that the penalty imposed under Section 78 was not sustainable and set it aside.

5. The Tribunal clarified that merely collecting Service Tax did not imply intent to evade payment, especially when the correct value was declared. The appellant's case fell under Section 73(3) for immunity. Consequently, the total Service Tax amount with interest paid by the appellant was upheld, and the appeal was allowed.

6. The judgment emphasized the application of Sections 73(3) and 73(4) of the Finance Act, 1994, highlighting the conditions for immunity and exceptions related to suppression of facts or intent to evade payment. The Tribunal's decision was based on the appellant's compliance with the provisions and their genuine efforts to rectify the situation before the issuance of the show-cause notice.

This comprehensive analysis covers the key issues raised in the judgment, providing a detailed breakdown of the arguments presented by both parties and the Tribunal's reasoning leading to the final decision.

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