2010 (4) TMI 184 - AT - Service Tax

GTA and Management consultant services- Tax paid before issuance of SCN- Show cause notice was issued proposing imposition of penalty under Section 76 and 77 of Finance Act, 1994, besides confirming the amount already paid towards service tax and appropriating the same. Held that- it has to be noted that under Section 80 of Finance Act, 1994, even in the cases where there is suppression or mis declaration, penalty can be waived. Further, Section 73 provides that even when there is suppression or mis-declaration, the assessee can pay penalty of 25% voluntarily and in such a situation also no further proceedings required.Therefore, I find no merit in the submissions made by learned DR. In these circumstances, stay petition as well as appeal, are allowed to the extent of imposition of penalty under Section 76 only. It is made clear that appropriation made of service tax, interest and penalty under Section 77 are upheld.

Summary

Issues:
1. Late payment of service tax and short payment by the appellant.
2. Filing of return beyond the due date.
3. Imposition of penalty under Sections 76 and 77 of the Finance Act, 1994.
4. Interpretation of Section 73(3) of the Finance Act, 1994 regarding payment of service tax before the issuance of show cause notice.

Analysis:

1. The appellant, engaged in providing GTA and management consultant services, paid service tax beyond the due date with some instances of short payment. The total short payment during the period was Rs. 16,013, which was later deposited along with interest. The return for the period was also filed late. A show cause notice was issued proposing penalty under Sections 76 and 77 of the Finance Act, 1994, along with confirming the amount already paid towards service tax.

2. The appellant did not challenge the penalty imposed under Section 77 but requested the setting aside of the penalty under Section 76. The appellant argued that Section 73(3) of the Finance Act, 1994 states that if the assessee pays the differential service tax and interest before the show cause notice, the matter should be considered concluded. The appellant relied on a tribunal decision and a circular by the Board to support this argument.

3. The Departmental Representative contended that imposing no penalty would lead to increased non-compliance with the law. Referring to Section 76 of the Finance Act, 1994, it was argued that the term "shall" makes payment mandatory, and failure to do so warrants a penalty. Previous tribunal decisions were cited to support the imposition of penalties in such cases.

4. The Tribunal analyzed the provisions of Section 73(3) and noted that if service tax is paid based on self-ascertainment before the issuance of a notice, the proceedings should be deemed concluded. The Tribunal disagreed with previous decisions that did not consider this provision and the Board's circular. It emphasized that Sections 73 and 76 should be read together, and penalties should be imposed only when necessary. The Tribunal allowed the appeal to the extent of penalty under Section 76, upholding the appropriation of service tax, interest, and penalty under Section 77.

This judgment clarifies the application of penalties under the Finance Act, 1994, in cases of late payment and short payment of service tax, emphasizing the importance of self-ascertainment and timely rectification to avoid penalties.