2019 (3) TMI 1384 - AT - Service Tax

Imposition of penalty - service tax with interest paid on being pointed out - Sub-Section 3 of Section 73 of FA - Held that - The appellants have discharged the service tax on both categories of services on being pointed out by the Officers of the Department. When the amounts as determined by the Officers have been discharged by the appellant as per Sub-Section 3 of Section 73 ibid there is no requisite for issuing a Show Cause Notice at all - The Hon ble High Court of Karnataka in the case of M/s. Adecco Flexione Workforce Solutions Ltd. 2011 (9) TMI 114 - KARNATAKA HIGH COURT has categorically held that no penalty can be imposed when the amount along with interest has been discharged much before issuance of Show Cause Notice. Penalty cannot sustain - demand with interest upheld - appeal allowed in part.

Summary

Issues:
1. Discharge of service tax on GTA Services and Repair and Maintenance Services.
2. Imposition of penalty under Section 76 and Section 78 of the Finance Act, 1994.

Analysis:
1. The appellants were engaged in manufacturing Sleeved Plug Valves, Butterfly Valves, and Actuators, registered under Goods Transport Agency (GTA) Services and Repair and Maintenance Services. They paid service tax on these services after scrutiny of accounts for February 2009. A Show Cause Notice later proposed a demand for service tax under GTA Services and Repair and Maintenance Services, along with penalties. The Original Authority confirmed the demand but only imposed a penalty under Section 76, not Section 78. Appeals were filed by both the assessee and the Department, leading to a series of orders by different authorities, ultimately reaching the Tribunal.

2. The appellant argued that as per Sub-Section 3 of Section 73 of the Finance Act, 1994, no penalty should have been imposed since they had paid the service tax along with interest before the Show Cause Notice was issued. They relied on a decision from a previous case to support their argument. On the other hand, the respondent supported the findings in the impugned order.

3. After hearing both sides and examining the records, the Tribunal found that the appellants had indeed paid the service tax on both categories of services upon being notified by the Department. The Tribunal referenced a High Court decision that stated no penalty should be imposed if the amount, along with interest, was paid before the Show Cause Notice. Consequently, the Tribunal concluded that the penalty imposed under Section 78 was not sustainable. Therefore, the impugned order was modified to set aside the penalty under Section 78, while upholding the demand and interest.

4. In conclusion, the appeal was partly allowed, with the Tribunal ruling in favor of the appellants by setting aside the penalty under Section 78, based on the precedent and legal provisions cited during the proceedings.