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2019 (10) TMI 169 - AT - Service TaxLevy of penalty u/s 78 of FA - appellant was providing Cleaning Services to Tumkur Dairy without disclosing the tax liability, etc - tax with interest paid on being pointed out - HELD THAT - Admittedly, the tax as well as the interest has been paid much before the issuance of SCN; even the SCN does not point out to suppression of fact, fraud or mis-statement etc. to fasten the liability of penalty under Section 78. In fact, the alleged activity was observed by the Audit Party from the appellant s ST-3 Returns only and it is not the case of the Revenue that there was gross violation by act of suppression, etc. - the bonafides of the appellant could not be doubted and hence, it is a fit case to invoke Section 80 of the Finance Act. There is no case made out with regard to the suppression, fraud or mis-statement etc. to fasten the penalty under Section 78 - Appeal allowed - decided in favor of appellant.
Issues involved: Levy of penalty under Section 78 for non-disclosure of tax liability in ST-3 Returns.
Analysis: 1. Levy of Penalty under Section 78: The only issue in the appeal was the imposition of penalty under Section 78 of the Finance Act, 1984. The appellant, engaged in various services including 'Manpower Recruitment & Supply Agency', 'Cleaning Service', and 'Renting of Immovable Service', was alleged to have provided 'Cleaning Services' to Tumkur Dairy without disclosing the tax liability. The appellant, upon being pointed out, promptly paid the entire tax with applicable interests. Subsequently, a show cause notice (SCN) was issued proposing penalties under Sections 76 and 78. The appellant contested the penalties, arguing that the tax and interest were paid before the SCN, and there was no suppression, fraud, or misstatement to warrant penalty under Section 78. 2. Bonafides and Section 80 of the Finance Act: The Tribunal noted that the tax and interest had been paid well before the issuance of the SCN, and there was no indication of suppression of facts or fraudulent intent. The Revenue did not allege gross violation through suppression. Considering these facts, the Tribunal opined that the appellant's bonafides could not be doubted. Therefore, the Tribunal deemed it a suitable case to apply Section 80 of the Finance Act, which provides relief in cases where the bonafides of the taxpayer are evident. 3. Sustainability of the Impugned Order: The Tribunal found that there was no evidence of suppression, fraud, or misstatement to justify the penalty under Section 78. It emphasized that when tax and interest are paid before the SCN, the requirement of the SCN itself is deemed unnecessary. As a result, the Tribunal held that the adjudication order was unsustainable, set it aside, and allowed the appeal in favor of the appellant. In conclusion, the Tribunal ruled in favor of the appellant, setting aside the penalty imposed under Section 78 due to the timely payment of tax and interest, absence of suppression or fraud, and the application of Section 80 of the Finance Act based on the appellant's bonafides.
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