2019 (2) TMI 21 - AT - Service Tax

Penalty u/s 77 and 78 of the Finance Act read with 15(3) of Cenvat Credit Rules - short payment of service tax - appellant already paid the said tax along with interest - requirement to issue SCN - appellant was not issued with show-cause under section 73(1) of the Finance Act - Held that - Though admissibility or inadmissibility of the credit in respect of renting of immovable property and business support service is a mixed question of fact and law, the same requires no discussion here in view of admission by the respondent except to the extent that there is a difference between compliance of audit report and discharge of duty liability in respect of imposition of tax as per Section 265 of the Constitution of India. Moreover, appellant was given a written promise before commencement of Audit that if any discrepancy in the audit is pointed out and the same is complied with, no further litigation would ensue. When show-cause does not contain the rule violated by the respondent while proposing penalty which Commissioner (Appeals) found from the factual aspect of the case to have been covered under Section 73(2) and held that in such an event proceeding is to be concluded under section 73(3), there is nothing left before this court to interfere with the finding of the Commissioner (Appeals). Penalty u/s 77 of FA - Held that - A reading of Section 70 of the Finance Act would take any prudent man to conclude that such a finding made by the Commissioner (Appeals) is not erroneous and therefore his order setting aside penalty under section 77 of the Finance Act needs no interference in view of the fact that audit was conducted on the basis of production of books of account and other documents. Appeal dismissed - decided against Revenue.

Summary

Issues involved: Appeal against setting aside of penalty under sections 77 and 78 of the Finance Act by the Commissioner of CGST & CE, (Appeals), Raigad.

Detailed Analysis:

1. Factual Background and Allegations:
The case involves Reliance Infocomm Infrastructure Ltd. availing ineligible cenvat credit and discrepancies in financial statements leading to a service tax liability. The appellant department challenged the penalty imposed under sections 77 and 78 of the Finance Act by the adjudicating authority, which was set aside by the Commissioner (Appeals).

2. Contentions of the Appellant Department:
The appellant argued that the Commissioner's order was erroneous as the show-cause notice did not explicitly invoke the proviso to Section 73(1) for imposing penalties under section 78. The appellant contended that the respondent suppressed facts and misstated information, justifying the penalties. Additionally, the burden of proof regarding cenvat credit admissibility was on the assessee, and any doubt should have been clarified with the department.

3. Response of the Respondent:
The respondent cooperated with the audit, paid the differential tax amount, and reversed credits as per the audit report's instructions. The respondent cited Section 73(3) of the Finance Act, arguing that issuing a show-cause notice after full payment of service tax and interest was not supported by the law. The respondent prayed for affirming the Commissioner's order.

4. Judicial Analysis and Decision:
The Tribunal analyzed the grounds on which the Commissioner had set aside the penalties. It noted that no show-cause notice was issued for the differential short payment of service tax as the appellant had already paid the tax with interest. The Tribunal found that the adjudicating authority did not establish suppression or misstatement against the appellant. The order also highlighted the appellant's acceptance of objections and discharge of service tax liability. The Tribunal upheld the Commissioner's finding that penalties under section 70 cannot be imposed for incorrect filing of returns. Consequently, the appeal was dismissed, confirming the Commissioner's order.

5. Conclusion:
The Tribunal affirmed the Commissioner's decision to set aside the penalties imposed under sections 77 and 78 of the Finance Act. The judgment emphasized the importance of compliance with audit observations and the lack of grounds for penalties based on the facts presented. The order was pronounced on 25.01.2019.