2023 (7) TMI 431 - AT - Service Tax

Levy of penalty - entire service tax dues along with interest deposited before issue of the show cause notice - suppression of facts or not - HELD THAT - The appellant voluntarily paid their entire service tax liability with interest thereon and reported such payments in their periodic returns filed. It is also observed that the Appellant has been in correspondence with the department about their liability of service tax on mining service. When a clarification was issued, they have voluntarily paid the service tax along with interest. Thus, there is no suppression or mis-representation of facts involved in this case. As per the provisions of Section 73(3) of the Finance Ac 1994, the Show Cause Notice should not have been issued to the appellant in the present case - This view has also been clarified by the Board in its Circular F.No. 137/46/2015-Service Tax dated 18.08.2015. The penalty under section 78 of the Finance Act is not imposable in this case. No penalty imposable under section 77 also, as the Appellant has taken registration and filed periodical returns regularly - appeal allowed.

Issues involved:
The issues involved in the judgment are the imposition of penalties under Sections 77 and 78 of the Finance Act, 1994 on the Appellant for non-discharge of service tax liability and the contention of the Appellant that penalties should not be imposed as they had voluntarily paid the service tax along with interest before the issue of the show cause notice.

Summary of Judgment:

Issue 1: Imposition of Penalties under Sections 77 and 78

The Appellant, engaged in providing 'mining services,' was investigated for non-discharge of service tax liability. A Notice was issued demanding service tax, interest, and penalties. The Order-in-Original confirmed the demand, but as the Appellant had already paid the service tax with interest, the penalty was reduced to 25% of the service tax. The Appellant contested the penalties, arguing that they had paid the tax before the show cause notice and had no intention to evade tax. The Departmental Representative upheld the penalties. The Tribunal observed that the Appellant had paid the tax dues before the notice, had sought clarification on taxability, and had filed returns on time, showing their bonafide intention. The Final Audit Report did not mention any non-payment of service tax. The Tribunal held that as per Section 73(3) of the Finance Act, no show cause notice should have been issued, and penalties were not warranted due to the Appellant's compliance and lack of suppression of facts.

Issue 2: Applicability of Penalties under Sections 77 and 78

The Appellant cited various decisions supporting their argument that penalties under Section 78 are not imposable when duty along with interest is paid before the notice. The Tribunal noted that the cited decisions and a Board Circular supported the Appellant's claim. Accordingly, the Tribunal held that no penalty under Section 78 was imposable in this case. Additionally, as the Appellant had taken registration and filed returns regularly, no penalty was imposable under Section 77. The Tribunal set aside the impugned order and allowed the appeal filed by the Appellant with consequential relief.

*(Pronounced in the open court on 08th June, 2023)*

← Previous Next →