2023 (8) TMI 12 - AT - Service Tax

Levy of penalty u/s penalty u/s 77 and Section 78 of Finance Act, 1994 - service tax paid before issue of show cause notice - suppression of facts or not - applicability of provisions of subsection (3) of Section 73 of Finance Act, 1994 - HELD THAT - The appellant had paid the entire service tax ascertained by them before issue of show cause notice. He had also paid interest of Rs. 23,39,370/- voluntarily before issue of show cause notice. It is found from the said sub-section (3) of Section 73 ibid that if the service provider, on the basis of its own ascertainment, pays service tax before issue of show cause notice, then Revenue cannot issue show cause notice. The said provision is not applicable only if the non-payment of service tax is on account of collusion, misstatement, suppression of fact with intention to evade payment of duty - in the present case, Revenue has invoked proviso to sub-section (1) of Section 73 of Finance Act, 1994 for raising demand for the larger period from 01.07.2010 to 31.03.2016 by issue of show cause notice on 27.04.2017. However, for invocation of extended period and for making inoperative the said provisions of subsection (3) of Section 74 ibid, there are dual criteria of collusion, misstatement, suppression of fact and intention to evade duty. In the present case, the appellant has paid the entire service tax before issue of show cause notice. Therefore, intention to evade service tax is absent in the present case. Therefore, there was no case for issue of show cause notice and, therefore, there would not have been occasion to propose imposition of penalty. Had there been no occasion to issue show cause notice, there could not have been occasion to impose penalty - the imposition of penalty under Section 77 and Section 78 of Finance Act, 1994 is not sustainable in the present case. The impugned order modified by setting aside penalties imposed on the appellant under Section 77 and Section 78 of Finance Act, 1994 - appeal allowed.

Summary

Issues Involved:
The issues involved in the judgment include the challenge of service tax levy on construction services, late filing of ST-3 returns, imposition of penalties under Section 77 and Section 78 of the Finance Act, 1994, and the applicability of proviso to sub-section (1) of Section 73 of the Finance Act, 1994.

Challenge of Service Tax Levy:
The appellant, engaged in providing construction services, challenged the levy of service tax on construction of complex services, which was upheld by the Hon'ble Bombay High Court. The appellant voluntarily paid service tax amounting to Rs. 7,07,02,774 for the period from Financial Year 2010-11 to Financial Year 2015-16, along with interest and filed ST-3 returns for the same period.

Late Filing of ST-3 Returns:
The appellant failed to file the ST-3 returns on due dates, leading to the issuance of a show cause notice proposing the confirmation of the already paid service tax, recovery of interest, levy of late fees, and imposition of penalties under Section 77 and Section 78 of the Finance Act, 1994.

Imposition of Penalties:
The original authority confirmed the demand, appropriated the paid service tax, ordered the recovery of interest, imposed late fees, and penalties under Section 77 and Section 78 of the Finance Act, 1994, invoking the proviso to sub-section (1) of Section 73 for the extended period of limitation.

Applicability of Proviso to Section 73:
The appellant contended that as per sub-section (3) of Section 73 of the Finance Act, 1994, if service tax is paid based on own ascertainment before the show cause notice, the Revenue cannot issue the notice unless there is collusion, misstatement, or suppression of fact to evade duty. The Tribunal found that since the appellant paid the entire service tax before the notice and there was no intention to evade tax, the penalties under Section 77 and Section 78 were not sustainable.

Conclusion:
The Tribunal held that since there was no intention to evade service tax and the appellant paid the tax before the show cause notice, the imposition of penalties under Section 77 and Section 78 was not justified. Therefore, the penalties were set aside, and the appeal was allowed with consequential relief as per the law.