2006 (3) TMI 9 - AT - Service Tax

Service Tax Service tax paid prior to issue of show cause notice not liable to imposition of penalty

Summary

Issues:
- Imposition of penalty under Section 76 of the Finance Act, 1994 for failure to take Service Tax Registration during a specific period.
- Applicability of penalty under Sections 76 & 77 of the Finance Act, 1994 for late filing of returns and payment of service tax.

Analysis:
1. The appeal was filed against a Revision Order dated 19.9.05 concerning the imposition of a penalty under Section 76 of the Finance Act, 1994. The appellants, commission agents for M/s. Indian Aluminium Ltd., failed to obtain Service Tax Registration during their operational period from September 2001 to March 2002. They later paid the Service Tax liability and interest to the Government. A show-cause notice was issued on 18.2.04, leading to the imposition of a penalty of Rs. 2,000 under Section 77. The jurisdictional Commissioner of Service Tax reviewed the case and imposed a penalty of Rs. 85,657 under Section 76.

2. The Tribunal considered the submissions and records, noting that the appeal challenged the penalty under Section 76. The Revisionary Order directed the penalty based on the belief that Tribunal decisions in Central Excise cases did not apply to Service Tax penalties under Section 76. Reference was made to a case involving Top Detective & Security Pvt. Ltd., where it was concluded that penalty is not mandatory if the service tax and interest are paid before the show-cause notice. Another case involving Eastern Security Concern reiterated this stance, leading the Tribunal to allow the appeal and set aside the Revisionary Order.

3. The Tribunal relied on the decisions in the Top Detective & Security Pvt. Ltd. case and the Eastern Security Concern case to rule in favor of the appellant. It was established that if the service tax and interest are paid before the show-cause notice, no penalty can be imposed. Consequently, the appeal was allowed, and the Revisionary Order was set aside.

4. In conclusion, the Tribunal's decision was based on the precedent set by previous cases, emphasizing that timely payment of service tax and interest, even before the issuance of a show-cause notice, exempts the assessee from penalty under Section 76. The appeal was allowed, and the Revisionary Order was overturned.