2021 (4) TMI 389 - AT - Service Tax

Levy of penalty - extended period of limitation - non/short payment of service tax or not - Revenue has submitted that the non payment of service tax in is instalments/ parts and also conduct of the appellant during the investigation proceedings is impressed upon to be highly non co-operative - HELD THAT - It is observed that the demand as raised by the Department against the appellant amounting to ₹ 40,79,178/-, the entire amount alongwith the interest of ₹ 3,08,328/- stands paid by the appellant over a period of four months starting from 21.01.2015 i.e. from the date even prior to the search was conducted in the appellant s premises and the entire aforesaid amount stand paid till May, 2015 i.e. much prior before the issuance of the impugned show cause notice dated 27.09.2016 as stands clear from the table in the show cause notice as well as reproduced in the order-in-original. Even an amount of ₹ 59,900/- for delayed filing of return has been made. It is apparent that the show cause notice has been issued after a period of almost 1 years from the date of the payment of entire demand. In the present case, where the entire payment has been paid even prior the order of assessment is being communicated to the appellant, the decision of Hon ble Apex Court in M/s Lark Chemicals Pvt. Limited 2016 (5) TMI 190 - SC ORDER is not applicable to the present case. Penalty - suppression of facts or not - intent to evade or not - HELD THAT - Reliance placed on the decision in M/S RADHE RESIDENCY VERSUS COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX, SURAT 2015 (7) TMI 716 - CESTAT AHMEDABAD , wherein it has been held that when the service tax stands paid alongwith interest after being pointed out but before the issuance of the show cause notice, the penalty under Section 78 of Finance Act, 1994 is not imposable - the appellant did not discharge his liability at the appropriate time as was otherwise required by the law and also fail to inform the issue of financial crunch as mentioned in the impugned appeal to the notice of the Department. The possibility of intentional suppression as is alleged against him cannot be ruled out. There are no infirmity in the order where the demand of service tax, though it stands already paid, is hereby confirmed - However, the order with respect to imposition of penalty is hereby set aside - appeal allowed in part.

Summary

Issues:
- Appeal against Order-in-appeal No. 24(SM) ST/JPR/2019 dated 28.01.2019
- Service tax demand of ?40,79,178/- along with interest and penalties under Section 78 of the Act
- Non-cooperation during investigation proceedings
- Allegations of suppression and invocation of extended period of limitation
- Imposition of penalty under Section 78 of Finance Act, 1994

Analysis:

The appellant, engaged in construction services, faced a service tax demand of ?40,79,178/- for the period from 01.04.2014 to 31.03.2015, as discovered during a visit by jurisdictional officers. Despite the demand, the appellant had paid the entire amount along with interest prior to the issuance of the show cause notice dated 27.09.2016. The show cause notice was issued almost 1½ years after the payment was completed, and the penalty under Section 78 of the Finance Act was imposed. However, the Tribunal noted that since the payment was made before the order of assessment was communicated, the penalty provision did not apply, citing a decision of the Hon’ble Apex Court. The Tribunal allowed the appeal partially, confirming the service tax demand but setting aside the penalty imposition due to the timing of payment.

During the proceedings, the appellant argued that the service tax amount for the impugned period had been paid to the Department before the issuance of the show cause notice, as evidenced by the details acknowledged in the notice itself. The appellant contended that there was no intentional non-payment and requested the penalty to be set aside. On the other hand, the Department highlighted the lack of cooperation from the appellant during the investigation, emphasizing that no documents were provided except for payment details. The Department asserted that the appellant's conduct warranted the invocation of the extended period of limitation due to alleged suppression.

The Tribunal, after considering the arguments, observed that while the appellant had paid the service tax amount before the show cause notice, there were shortcomings in timely compliance with the law and failure to disclose financial constraints to the Department. The possibility of intentional suppression could not be dismissed. Consequently, the Tribunal confirmed the service tax demand but set aside the penalty imposition under Section 78 of the Finance Act, 1994, based on precedents indicating that when the tax is paid before the show cause notice, the penalty is not applicable. The appeal was partly allowed, recognizing the payment made by the appellant but overturning the penalty imposition.