2023 (8) TMI 188 - AT - Service Tax

Levy of penalty u/s 77 and 78 of FA - Service tax alongwith interest already paid, prior to issuance of SCN - invocation of extended period of limitation under Section 73(3) of the Act - audit on the appellant has not been conducted and no audit objection was raised - HELD THAT - On perusal of Section 73(3) shows that if a tax is paid along with interest before the issuance of show cause notice then in that case show cause notice shall not be issued and in the present case also, it is found that the contention of the appellant that they had bona-fide belief that they are not liable to pay service tax but when they realised on their own, they immediately paid the service tax along with interest which is admitted in the impugned order itself. In the case of YCH LOGISTICS (INDIA) PVT. LTD. VERSUS C.C.E C.S.T. -BANGALORE SERVICE TAX- I 2020 (3) TMI 809 - CESTAT BANGALORE , this Tribunal in identical facts has held In the present case, we find that the contention of the appellant that they bona fidely believed that they are not liable to pay service tax but when the audit party raised the objection that they are liable to pay service tax, then they immediately paid the service tax along with interest which is admitted in the impugned order, is justified. It is found that the case law relied upon by the Ld. DR is not applicable in the facts and circumstances of the present case because in that decisions the assessee has challenged the levibility of service tax on outdoor catering services which was adjudicated by the authorities below whereas in this case the appellant suo-moto without being pointed by the department paid the service tax along with interest much before the issuance of show cause notice hence the issue of imposition of penalty is covered by the various decisions cited in favour of the appellant. The appellants are not liable to pay penalty under Section 77 78 - Appeal allowed.

Summary

Issues Involved:
1. Imposition of penalty under Section 77 and 78 of the Finance Act, 1994.
2. Applicability of the extended period of limitation under Section 73(1) of the Finance Act, 1994.

Summary:

1. Imposition of Penalty under Section 77 and 78:
The appellant contested the imposition of penalties under Sections 77 and 78 of the Finance Act, 1994, arguing that the service tax demand along with interest was paid suo-moto prior to the issuance of the show cause notice. The appellant claimed a bona-fide belief that the subsidy received was not subject to service tax, referencing the Apex Court's decision in Tisco General Office Recreation Club Vs. State of Bihar, which held that subsidy given for running a canteen is not subject to sales tax. The Tribunal held that the imposition of penalty was not justified as the appellant had paid the service tax along with interest before the issuance of the show cause notice, and there was no suppression or intention to evade payment of tax. This was supported by several precedents, including YCH Logistics (India) Pvt. Ltd. and The Lalit Ashok Vs. Commissioner of Central Tax, Bangalore, which established that no penalty can be imposed if the service tax is paid along with interest before the issuance of the show cause notice.

2. Applicability of Extended Period of Limitation:
The Tribunal examined Section 73(1) of the Finance Act, 1994, which allows for an extended period of limitation in cases involving fraud, collusion, willful misstatement, suppression of facts, or contravention of provisions with intent to evade payment of service tax. The Tribunal found that the appellant had a bona-fide belief regarding the non-liability of service tax on the subsidy received and had voluntarily paid the service tax along with interest before any show cause notice was issued. Consequently, the extended period of limitation was deemed inapplicable as there was no evidence of suppression or intent to evade payment of service tax.

Conclusion:
The Tribunal set aside the penalties imposed under Sections 77 and 78 of the Finance Act, 1994, and allowed the appeal of the appellant, concluding that the appellant was not liable to pay the penalties since the service tax along with interest had been paid voluntarily before the issuance of the show cause notice. The decision was pronounced in the open court on 02.08.2023.