2021 (6) TMI 546 - AT - Service Tax

Levy of penalty - delayed payment of service tax - tax was deposited on being pointed out - Section 73 of FA - HELD THAT - The very SCN was issued in the year 2014 for which the compliance was already made by the appellant in 2011 by way of payment of tax and interest soon after the short payment was detected. The only allegation in the SCN is that the appellant-assessee has not deposited service tax on their own ascertainment. When the tax amount stands already deposited with interest, the very SCN was not required to be issued under Section 73(3). Merely because the tax amount has been deposited on the basis of ascertainment by the Department, the assessee cannot be deprived of the benefit of aforesaid provisions, more so in view of the fact that no evidence has been adduced in the SCN that there was a deliberate short payment. Penalty is required to be set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
Imposition of penalty under Section 78 of the Finance Act, 1994.

Analysis:
The appeal was filed against the penalty imposed on the assessee under Section 78 of the Finance Act, 1994. The penalty was initially upheld by the Ld. Commissioner (Appeals) and was challenged in the present appeal before the Tribunal. The facts of the case revealed that the appellant, engaged in providing taxable services, had a short payment of service tax detected during an audit. The appellant immediately deposited the short payment along with interest upon detection. A Show Cause Notice (SCN) was issued proposing the demand and imposition of penalty equivalent to the service tax amount. The adjudicating authority confirmed the demand, ordered the appropriation of the deposited amount, and imposed a penalty under Section 78. The appeal against this order was unsuccessful, leading to the present appeal before the Tribunal.

The appellant argued that since the service tax amount was promptly deposited along with interest upon detection of the short payment, no further penalty should be imposed as per Section 73(3) of the Act. The appellant also claimed entitlement to the benefit of Section 80 of the Act for waiver of the penalty amount. The appellant cited judicial pronouncements in support of their arguments. On the other hand, the Revenue's Authorized Representative contended that the appellant willfully did not pay the service tax and thus was not eligible for the benefit of Section 80. The Representative supported the penalty upheld in the impugned order as legally correct.

After hearing both sides and reviewing the records, the Tribunal found that the penalty was imposed on the ground that the appellant did not deposit the service tax based on their own ascertainment, which was rectified promptly upon detection during the audit. The Tribunal noted that the tax amount had already been deposited with interest, and the SCN issued in 2014 was unnecessary as compliance had been made in 2011. The Tribunal emphasized that the appellant should not be deprived of the benefit of the provisions when the tax amount had been deposited, especially in the absence of evidence of deliberate short payment or intent to evade tax. Consequently, the Tribunal set aside the penalty, ruling in favor of the appellant.

In conclusion, the Tribunal allowed the appeal, setting aside the penalty imposed, as the tax amount along with interest had already been deposited by the appellant, and there was no evidence of fraud or suppression to evade tax. The decision was pronounced in the open court on 16 June 2021.