2019 (6) TMI 962 - AT - Service Tax

Imposition of Penalty - service tax paid along with interest before the issue of SCN - benefit u/s 73(3) of the Finance Act, 1994 - suppression of facts or not - bonafide belief - HELD THAT - This issue is no more res integra and has been settled in favour of the appellant that once the appellant pays the tax along with interest before the issue of show-cause notice, then he is not liable to pay the penalty as held in the case of M/S. T.V. ISMAIL HAJI CO. VERSUS COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX 2017 (5) TMI 766 - CESTAT BANGALORE . The appellants are not liable to pay the penalty under Section 78, which is set aside - As far as, penalty under Rule 7c read with Section 70 is concerned, it is also set aside because the same Rule 7 is not applicable in the facts and circumstances of the case - Penalty under Section 77(1)(a) is upheld because the appellant failed to get themselves registered under the service tax within the stipulated time. The penalty under Section 78 and Rule 7c read with Section 70 is dropped and penalty of ₹ 10,000/- under Section 77(1)(a) is upheld - appeal allowed in part.

Summary

Issues:
1. Applicability of penalty under Section 78 of the Finance Act, 1994.
2. Imposition of penalty under Rule 7c of the Service Tax Rules, 1994 read with Section 70 of the Act.
3. Failure to register under the Service Tax within the stipulated time.

Analysis:

Issue 1: Applicability of penalty under Section 78
The appellant contended that once the service tax along with interest was paid before the show-cause notice was issued, they were not liable for penalty under Section 78 of the Finance Act, 1994. The counsel relied on various decisions to support this argument. The Tribunal, after considering the submissions and precedents, agreed with the appellant's stance. It was noted that the appellant had informed the authorities about the payment before any notice was issued, thus falling under the purview of Section 73(3) of the Finance Act. Consequently, the Tribunal set aside the penalty under Section 78.

Issue 2: Imposition of penalty under Rule 7c
The appellant argued against the imposition of a penalty under Rule 7c of the Service Tax Rules, 1994, contending that it was not applicable in their case as they had not filed any returns due to non-registration under the Service Tax. The Tribunal concurred with this argument, stating that the penalty under Rule 7c was not applicable in the circumstances presented. Thus, the penalty under Rule 7c read with Section 70 was set aside.

Issue 3: Failure to register under the Service Tax
While the appellant did not contest the penalty of &8377; 10,000 under Section 77(1)(a) for failing to register under the Service Tax within the prescribed time, the Tribunal upheld this penalty. It was noted that the appellant had indeed failed to register within the stipulated timeframe, leading to the imposition of the penalty under Section 77(1)(a).

In conclusion, the Tribunal dropped the penalties under Section 78 and Rule 7c read with Section 70, while upholding the penalty of &8377; 10,000 under Section 77(1)(a). The appeal was disposed of accordingly, with the operative portion of the Order pronounced in Open Court on 04/06/2019.