2019 (6) TMI 1274 - AT - Service Tax

Imposition of penalty u/s 78 of FA - Suppression of facts or not - intent to evade - failed to pay service tax on the amounts so collected towards Business Auxiliary Services from October 2013 onwards - bonafide belief - short payment was later paid alongwith interest - HELD THAT - In the impugned order, the Commissioner (A) has set aside the demand of ₹ 50,43,406/- on the ground that the appellant has been paying the service tax by debiting their CENVAT account every month. Further, the Commissioner (A) has also found that the appellant has paid ₹ 7,69,433/- being the short-paid service tax for the month of October 2014 and December 2014 along with interest in May 2015 but still the Commissioner (A) imposed the penalty of ₹ 3,84,717/- under Section 78. Once the appellant has paid the service tax along with interest, he is not required to pay penalty under Section 78. Appeal allowed - decided in favor of appellant.

Issues:
- Appeal against imposition of penalty for suppression of fact with intent to evade payment of duty under Section 78 of the Finance Act, 1994.
- Discrepancy in payment of service tax for the period October 2013 to December 2014.
- Applicability of penalty under Section 78 of the Finance Act, 1994 for non-filing of statutory returns.

Analysis:
1. The appeal challenged the penalty imposed for suppression of fact with intent to evade payment of duty under Section 78 of the Finance Act, 1994. The Commissioner (A) partially allowed the appeal and imposed a penalty of ?3,84,717 for the alleged suppression of facts by the appellant. The appellant contended that they regularly discharged their service tax liability by debiting their CENVAT account every month, except for specific instances where the shortfall was rectified later. The Original Authority upheld the demand for ?58,12,838, alleging non-payment of service tax and non-filing of statutory returns, and imposed penalties under Sections 78 and 70 of the Finance Act, 1994 respectively.

2. The appellant argued that they had paid the outstanding service tax amount along with interest before the issuance of the show-cause notice, as per Section 73(3) of the Finance Act, 1994. They cited judicial precedents, including CCE vs. Adecco Flexione Workforce and CCE vs. Galaxy Construction P. Ltd., to support their contention that no penalty should be imposed if the service tax and interest were paid before the notice was issued. Additionally, they relied on Calderys India Refractories Ltd. vs. CCE, Aurangabad, to assert that penalties cannot be imposed when transactions are duly reflected in the books of the assessee.

3. The Commissioner (A) set aside a portion of the demand but still imposed a penalty of ?3,84,717 under Section 78. The appellant argued that the penalty was unwarranted as they had paid the service tax and interest before the notice was served, as per Section 73(3) of the Finance Act, 1994. The Tribunal, relying on the decisions in Krishna H.T. vs. CCT and Calderys India Refractories Ltd. vs. CCE, held that the penalty was not sustainable in law. The Tribunal emphasized that when the service tax and interest were paid before the issuance of the show-cause notice, no penalty under Section 78 should be levied.

4. In light of the precedents and the facts of the case, the Tribunal found that the imposition of the penalty under Section 78 was unjustified. The Tribunal concluded that the appellant had complied with the payment of service tax and interest before the notice, and therefore set aside the penalty, allowing the appeal with consequential relief.

This detailed analysis of the issues involved in the legal judgment provides a comprehensive understanding of the case and the reasoning behind the Tribunal's decision to set aside the penalty imposed under Section 78 of the Finance Act, 1994.

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