2006 (5) TMI 25 - AT - Service Tax

Service Tax If service tax alongwith interest were paid prior to issuance of SCN Penalty not leviable

Summary

Issues:
1. Challenge against the imposition of penalty for delay in depositing Service Tax.

Analysis:
The appellant filed an appeal against the penalty imposed for delayed payment of Service Tax, which had already been paid along with interest before the show cause notice was issued. The appellant attributed the delay to a software fault in their computer system. They relied on a previous case and a tax payer friendly scheme to argue that no penalty should be imposed. On the other hand, the Revenue cited a different case where penalties were upheld for late tax payment.

Upon reviewing the cases presented, the Tribunal noted that the Service Tax in question had been paid before the show cause notice was issued, distinguishing it from the case cited by the Revenue where tax was paid after the notice. The Tribunal referred to precedents where it was held that if the tax is paid before the notice, penalty is not sustainable. Additionally, the Tribunal considered the tax payer friendly scheme introduced by the Revenue department and Section 80 of the Finance Act, which provides for no penalty if there was a reasonable cause for the failure to pay on time.

In light of the above analysis and the Tribunal's previous decisions, it was concluded that since the Service Tax along with interest was paid before the show cause notice, the imposition of penalty was not sustainable. Therefore, the penalty was set aside, and the appeals were allowed.