2018 (7) TMI 435 - AT - Service Tax

Penalty u/s 78 - suppression of facts - the allegation in the present case is the suppression of the fact inasmuch as the appellant suppressed the true value of the services rendered by them and declared a lower value in ST-3 returns - appellant paid the service tax along with applicable interest as pointed out by the audit even before show cause notice was issued - Held that - In an identical case in respect of the Cholamandalam MS General Insurance Company Ld., and CESTAT Chennai, 2018 (2) TMI 287 - CESTAT CHENNAI , had held that not reflecting the true value of services rendered in the ST-3 returns accounts to suppression of facts and therefore penalty under Section 78 is imposable - penalty upheld. Payment of the differential service tax along with interest before issuance of show cause notice - Held that - It is now being settled by the Hon ble Supreme Court in the case of Rajasthan Spinning & Weaving Mills 2009 (5) TMI 15 - SUPREME COURT OF INDIA , that when mandatory penalty is imposable, whether the duty is paid before issue of show cause notice or after notice cannot alter the penalty. Appeal dismissed - decided against appellant.

Summary

Issues:
- Appellant's failure to correctly declare the value of services in ST-3 returns leading to short payment of service tax.
- Imposition of penalty under Section 78 of the Finance Act, 1994 due to alleged suppression of facts by the appellant.

Analysis:

Issue 1: Appellant's failure to correctly declare the value of services in ST-3 returns leading to short payment of service tax:
The appellant, engaged in manufacturing Hydraulic Cylinders, registered under Central Excise and service tax provisions, had short paid service tax during 2013-2016 on services like GTA Service, Manpower Recruitment, Rent-a-Cab. The Department detected this during an audit, leading to a show cause notice under Section 73 of the Finance Act. The appellant paid the differential tax and interest before the notice. The Commissioner (Appeals) upheld the Order-in-Original, stating that the appellant suppressed facts by not declaring the true value in ST-3 returns. The appellant argued it was an error without intent to evade tax, citing immediate payment post-audit. However, the Departmental Representative contended that the penalty under Section 78 is mandatory due to suppression of facts, supported by legal precedents.

Issue 2: Imposition of penalty under Section 78 of the Finance Act, 1994 due to alleged suppression of facts by the appellant:
The key question was the imposition of penalty under Section 78, which mandates penalties for fraud, collusion, willful misstatement, suppression of facts, or contravention with intent to evade tax. The appellant's failure to declare the true value in ST-3 returns was considered suppression of facts, justifying the penalty. Citing a similar case precedent, the Tribunal upheld the penalty, emphasizing that payment of tax before the notice does not alter the penalty's imposition. The judgment highlighted that the appellant's actions fell under the category of suppression of facts, making the penalty under Section 78 applicable. The Tribunal rejected the appeals, upholding the Order-in-Appeal based on legal principles and precedents.

This detailed analysis of the judgment from the Appellate Tribunal CESTAT HYDERABAD demonstrates the legal intricacies surrounding the issues of incorrect declaration of service values and the imposition of penalties for suppression of facts under the Finance Act, 1994.