2024 (12) TMI 742 - AT - Service Tax

Quantum of penalty u/s 78 of the Finance Act, 1994 - HELD THAT - The penalty under Section 78 can be set aside when a sufficient cost for non-payment of service tax is shown by the assessee. In the present case it is undisputed fact that the entire transaction was recorded by the appellant in the books of account and the service tax liability has been admitted by the appellant which was discharged well before the issuance of show cause notice and interest was also paid. As per Section 73(3) of Finance Act, 1994, it is clear that if the assessee pays the tax liability along with interest before issuance of show cause notice, the entire case stand closed and no show cause notice should be issued. As discussed, since, the appellant did not have mala fide intention, their case is not hit by section 73 (4) also. Therefore, considering the overall facts and circumstances of the case, the appellant has been able to show the reasonable cause for nonpayment of service tax. Therefore, penalty Imposed under Section 78 can be set aside, invoking section 80 as well as invoking Section 73(3) of the Finance Act. Penalty set aside - appeal allowed.

Summary

Issues:
Contesting penalty imposed under Section 78 of the Finance Act, 1994.

Analysis:
The case involved an appeal before the Appellate Tribunal CESTAT AHMEDABAD where the appellant contested the penalty imposed under Section 78 of the Finance Act, 1994. The appellant had undergone an audit for the period 2010-11 to 2014-15, which revealed a service tax liability discrepancy. Subsequently, a show cause notice was issued demanding service tax payment, which led to the imposition of a penalty. The appellant, through their consultant, argued that the non-payment of service tax was due to financial difficulties and not intentional evasion. They highlighted that the liability was duly accounted for, discharged, and returns were filed before the notice was issued. The appellant also disputed a specific invoice, claiming that the service tax demand related to it was not valid. The Revenue, represented by a Superintendent, supported the findings of the impugned order.

Upon careful consideration, the Tribunal noted a discrepancy in the calculation and decided to address only the issue of the penalty under Section 78. The Tribunal referred to Section 80 of the Finance Act, which allows for penalty waiver in certain cases where reasonable cause for failure to pay service tax is proven. The Tribunal observed that the appellant had recorded the transactions, admitted the liability, and paid the tax along with interest before the notice was served. Based on these facts, the Tribunal concluded that the appellant did not have any mala fide intention to evade tax, aligning with Section 73(3) of the Finance Act, 1994. This section stipulates that if the tax liability is paid along with interest before a show cause notice is issued, no penalty should be imposed. Consequently, the Tribunal set aside the penalty imposed under Section 78, invoking both Section 80 and Section 73(3) of the Finance Act.

In light of the above analysis, the Tribunal allowed the appeal, pronouncing the decision on 12.12.2024.