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2022 (9) TMI 129 - AT - Service TaxLevy of penalty - tax paid before the issuance of the Show Cause Notice - mala fide intent to evade payment of service tax or not - sections 77(1)(a), 77(2) and 78 of the Finance Act, 1994 - HELD THAT - The issue involved in this appeal is no more res integra in view of the decision of the Tribunal in the case of M/S BHORUKA ALUMINIUM LIMITED. VERSUS THE COMMISSIONER OF CENTRAL EXCISE SERVICE TAX, MYSORE 2016 (11) TMI 1292 - CESTAT BANGALORE where it was held that the contention of the appellant that he bonafide believed that he is not liable to pay service tax but during the audit, the audit party informed him that he is liable to pay service tax, then he immediately paid the entire service tax along with interest. Except mere allegation of suppression, the Department did not bring any material on record to prove that there was suppression and concealment of facts to evade payment of tax. Appeal allowed - decided in favor of appellant.
Issues:
1. Penalty imposition under Section 78 of the Finance Act, 1994 based on suppression of facts. 2. Applicability of Section 73(3) regarding payment of service tax before issuance of show cause notice. 3. Justification of penalty imposition under Section 78 in the absence of evidence of suppression. Detailed Analysis: Issue 1: The primary issue in this case pertains to the imposition of a penalty under Section 78 of the Finance Act, 1994 on the grounds of suppression of facts. The Appellant, a registered entity providing "Restaurant" and "Accommodation in Guest House" services, was found to have short paid service tax amounting to Rs.12,08,519 during a scrutiny of records. A Show Cause Notice was issued for recovery, including interest and penalties. Both the Adjudicating Authority and the first appellate authority upheld the penalty based on suppression, leading to the present appeal. Issue 2: The crux of the matter revolves around the interpretation and application of Section 73(3) of the Finance Act, 1994. The Appellant had voluntarily paid the service tax amount before the issuance of the Show Cause Notice, contending that there was no malicious intent to evade payment. The Appellant relied on legal precedents and argued that as per Section 73(3), if tax is paid with interest before the issuance of the notice, the authority is precluded from issuing such a notice. The Tribunal cited relevant case law to support this interpretation. Issue 3: The Tribunal analyzed the contentions of both parties and reviewed the provisions of Sections 73, 76, and 78 of the Finance Act, 1994. The Appellant's argument that there was no suppression of facts and that the tax was paid promptly upon being informed of the liability during an audit was considered. The Tribunal found that the Department failed to provide evidence of suppression or concealment to evade tax. Consequently, the Tribunal deemed the penalty imposition under Section 78 unjustified and legally untenable. The lack of findings on suppression in the impugned order further supported the decision to set aside the penalty. In conclusion, the Tribunal, relying on precedent and statutory provisions, ruled in favor of the Appellant, setting aside the penalty imposed under Section 78 of the Finance Act, 1994. The judgment emphasized the importance of timely tax payment, the absence of suppression evidence, and adherence to legal principles in penalty imposition.
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