2018 (9) TMI 1452 - AT - Service Tax

Penalty u/s 78 of FA - mining of mineral service - Non-payment of service tax - bona fide belief - service tax alongwith interest paid on being pointed out - invocation of Section 73(3) of the Finance Act. Held that - The service tax liability was shown in the books of accounts but it was not paid on account of the fact that they could not get the service tax collected from their clients - further, there is no suppression of facts because all the transactions are reflected in the books of accounts and the audit party detected these transactions from their records only. Service tax paid alongwith Interest on being pointed out - Section 73(3) of the Finance Act - Held that - When the service tax is paid along with interest before issuance of show-cause notice, then the Revenue should not have issued the show-cause notice as per Section 73(3) of the Finance Act. Penalty not warranted - appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against order imposing penalty under Section 78 of the Finance Act, 1994.

Analysis:
The case involves the appellant providing services under "mining of mineral service" category. The Joint Commissioner issued a show-cause notice alleging short payment of service tax based on discrepancies in income declared in ST-3 returns and Trial Balance for 2014-15. The original authority confirmed a demand of Rs. 24,71,701 under Section 73(1) and imposed a penalty under Section 78. The appellant appealed to the Commissioner (A), who upheld the decision, leading to the present appeal.

The appellant argued that the impugned order did not consider the facts and law properly, citing judicial precedents supporting their position. They contended that all transactions were recorded, and the alleged short payment was included in the Trial Balance. The appellant relied on Section 73(3) of the Finance Act, 1994, stating that paying tax with interest before a show-cause notice bars its issuance. They referenced a Circular by CBEC and decisions by the Karnataka High Court to support their argument.

The respondent defended the order, alleging suppression of facts by the appellant. The AR cited legal precedents to justify the penalty under Section 78. However, the Tribunal found no suppression of facts as all transactions were recorded, and the service tax was paid after being informed by the audit party. Referring to relevant case law, the Tribunal concluded that the appellant's actions did not warrant the penalty. The Tribunal also noted that the decisions cited by the Revenue were not applicable to the case, as it was covered by the Karnataka High Court rulings. Consequently, the impugned order was set aside, and the appeal of the appellant was allowed.

In conclusion, the Tribunal held that the imposition of the penalty under Section 78 was unjustified, as the appellant had paid the service tax with interest before any show-cause notice was issued, and there was no evidence of suppression to evade tax. The Tribunal's decision was based on the interpretation of relevant legal provisions and precedents, ultimately ruling in favor of the appellant.