2023 (7) TMI 361 - AT - Service Tax

Non-payment of Education Cess and SHE Cess - payments were made as soon as the payments were pointed out by the officials - validity of proceedings as per Section 73(3) of Finance Act, 1994 - HELD THAT - It is not in dispute that the Education Cess and SHE Cess has been paid along with interest by the Appellant immediately on being pointed out by the Audit Officials much before the Show Cause Notice was issued on 08/102015. In terms of Section 73(3) of the Finance Act, in such case, no Show Cause Notice should have been issued. The Hon ble karnatka High Court in the case of COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX VERSUS M/S ADECCO FLEXIONE WORKFORCE SOLUTIONS LTD 2011 (9) TMI 114 - KARNATAKA HIGH COURT , has held Though the law does not say so, authorities working under the law seem to think otherwise and thus they are wasting that valuable time in proceeding against persons who are paying service tax with interest promptly. This Tribunal in the case of M/S. SEN BROTHERS VERSUS COMMISSIONER OF CENTRAL EXCISE, BOLPUR 2013 (12) TMI 433 - CESTAT KOLKATA has held once the appellant has already discharged Service Tax liability and the interest thereon and no additional liability has been adjudged in the adjudication proceedings, provisions of Section 73(3) will be applicable in this case and there was no necessity of issuing any show cause notice to the appellant. In such cases no penalty is imposable by virtue of Explanation 2 to sub-section (3) of Section 73 of the Finance Act, 1994. Extended period of limitation - Penalty u/s 78 - HELD THAT - It is seen that inspite of having full knowledge that the Appellant has made the payment of Service Tax along with interest on 12/11/2012, the Department has issued the Show Cause Notice on 08/10/2015 i.e. after about three years from the date of receipt of entire payment. They have invoked the provisions of extended period, which was not at all applicable in this case. Hence, the confirmed penalty under section 78 is required to be set aside, even on this count. Appeal allowed.

Summary

Issues involved:
The issues involved in this case are non-payment of Education Cess and SHE Cess by the Appellant for the period April 2008 to March 2012, subsequent audit detection, demand for payment along with interest, confirmation of demand, and imposition of penalty under section 78.

Details of the Judgment:

Issue 1: Payment of Cess and Interest
The Appellant, engaged in Works Contract Services and Business Auxiliary Services, did not pay Education Cess and SHE Cess for the mentioned period. Upon audit detection, the Appellant paid the outstanding amount of Rs. 1,29,680/- along with interest of Rs.38,531/- immediately after being pointed out by the Audit Department.

Issue 2: Applicability of Section 73(3) of Finance Act, 1994
The Appellant argues that as per Section 73(3) of the Finance Act, no proceedings should have been initiated against them since the payments were made promptly upon detection by officials. Citing relevant case laws, the Appellant contends that when the entire Service Tax is discharged along with interest immediately upon detection, no penalty should be imposed.

Issue 3: Legal Precedents and Interpretation
Referring to legal precedents, including a case by the Karnataka High Court, it is emphasized that if tax is paid with interest promptly upon detection, no penalty should be imposed. The Tribunal also held that once the Service Tax liability and interest are paid before the issuance of a show cause notice, no penalty is imposable.

Issue 4: Set Aside of Penalty
The Tribunal found that the Department issued the Show Cause Notice after the Appellant had already paid the Service Tax and interest, invoking provisions that were not applicable. Consequently, the confirmed penalty under section 78 was set aside, and the Appeal was allowed with consequential relief.

In conclusion, the Tribunal set aside the penalty imposed under section 78, emphasizing the prompt payment made by the Appellant upon detection of non-payment. The judgment highlights the importance of adhering to legal provisions and precedents in cases of tax liabilities and penalties.