2019 (3) TMI 165 - AT - Service Tax

Penalty - short-payment of service tax - service tax with interest paid on being pointed out - no intent to evade - Held that - Once the appellant had paid the service tax before the issue of show-cause notice along with interest and there is no fraud, willful misstatement or suppression of facts with intent to evade tax, then he is not liable to pay any penalty - Reliance placed in a Tribunal decision M/S BHORUKA ALUMINIUM LIMITED. VERSUS THE COMMISSIONER OF CENTRAL EXCISE & SERVICE TAX, MYSORE 2016 (11) TMI 1292 - CESTAT BANGALORE , where it was held that Section 73(3) is very clear as it says that if tax is paid along with interest before issuance of the show cause notice, then in that case, show cause notice shall not be issued - penalty not imposable - appeal allowed - decided in favor of appellant.

Summary

Issues:
Short payment of service tax, imposition of penalty under Section 78, payment of tax before issuance of show-cause notice, suppression of facts, sustainability of penalty.

Analysis:
The appeal pertains to a case where the appellant was engaged in providing various services and was found to have short paid service tax amounting to ?17,48,317 for the period January 2015 to March 2016. A show-cause notice was issued demanding the tax along with interest and proposing a penalty under Section 78. The Assistant Commissioner confirmed the demand and imposed a penalty. The appellant then paid the entire service tax and interest before the issuance of the show-cause notice. The appellant contended that the order rejecting the appeal was unsustainable as the facts and law were not properly appreciated. The appellant argued that despite confusion regarding taxability, they paid the tax before the notice was issued, relying on various decisions supporting their stance.

The learned consultant for the appellant argued that since the entire service tax and interest were paid before the show-cause notice, the notice should not have been issued. The appellant cited legal precedents to support their argument. On the other hand, the learned AR contended that the penalty was justified due to the short payment of service tax. After considering the submissions and relevant provisions of the Finance Act, the Judicial Member found that if tax is paid along with interest before the issuance of the show-cause notice, and there is no fraud or suppression of facts to evade tax, then no penalty is applicable. Citing a previous Tribunal order, it was established that the imposition of penalty under Section 78 was not justified in the absence of suppression of facts. The Judicial Member set aside the impugned order, ruling in favor of the appellant.

In conclusion, the Judicial Member, following the precedent and legal provisions, held that the imposition of penalty was not sustainable in law. The impugned order was set aside, and the appeal of the appellant was allowed.