2019 (3) TMI 119 - AT - Service Tax

Demand of duty - Penalty - Held that - it is clear that the appellant has discharged the service tax along with interest before issuance of show cause notice. The same has been appropriated in the adjudication order passed by the adjudicating authority. Sub-section (3) of section 73 says that whenever service tax is paid up along with interest, before issuance of show cause notice, no penalties or in particular no show cause notice has to be issued - Appeal allowed with consequential relief.

Summary

Issues involved:
1. Imposition of penalty under section 78 of the Finance Act, 1994 for non-payment of service tax.

Detailed Analysis:
The case involved the appellants providing services of Site Formation, Excavation, and Demolition to a company and collecting service tax amounting to ?16,93,372 but failing to remit it to the Central Government. The original authority confirmed the demand along with interest and imposed an equal penalty under section 78. The Commissioner (Appeals) upheld the penalty, leading to the appeal before the Tribunal.

The Appellant's Argument:
The appellant's counsel argued that the service tax was discharged along with interest immediately upon being pointed out by the department, before the issuance of the show cause notice. Citing sub-section (3) of section 73 of the Finance Act, 1994, it was contended that no penalty can be imposed in such cases. The appellant emphasized that there was no intention to evade payment, as evidenced by timely filing of returns and immediate payment upon detection of the issue.

Respondent's Submission:
The respondent contended that the appellant's act of collecting service tax but not remitting it to the Government indicated suppression of facts with the intent to evade payment. The respondent supported the penalty imposed under section 78, referencing specific sections of the show cause notice and the impugned order.

Tribunal's Decision:
After considering both sides, the Tribunal noted that the appellant had indeed paid the service tax along with interest before the show cause notice was issued, as per records. Referring to sub-section (3) of section 73, the Tribunal highlighted that the provision aims to encourage voluntary compliance and reduce litigation. Citing a relevant High Court decision, the Tribunal ruled that when the service tax is paid along with interest before the issuance of a show cause notice, no penalty can be imposed. The Tribunal found no evidence of intent to evade payment, especially since the appellant had promptly paid upon detection and financial hardships were cited. Relying on a precedent, the Tribunal set aside the penalty imposed under section 78, modifying the impugned order accordingly and allowing the appeal for relief.

In conclusion, the Tribunal's judgment focused on the timely payment of service tax along with interest before the issuance of the show cause notice, emphasizing the legislative intent to encourage compliance and avoid unnecessary penalties in such cases.