2012 (6) TMI 46 - AT - Service Tax

Delayed payment of service tax - jurisdictional Assistant Commissioner issued a show-cause notice alleging non-payment of service tax Held that - appellant-assessee had discharged the service tax liability and interest thereon much before the issue of the show-cause notice and had also filed the service tax return for the relevant period before the issuance of the notice. They also informed that they had also deposited late fee of Rs. 2, 000/- for the delayed filing of the return provisions of sub-section (3) of Section 73 is clearly attracted in the facts of the case and issuance of a show-cause notice for demand of service tax and imposition of penalties was not at all warranted. imposition of penalties under Sections 76 77 and 78 in this case was not at all warranted and therefore set aside. The appeal is allowed

Summary

Issues:
Non-payment of service tax, imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994, appeal against the Order-in-Appeal No: SR/199/NGP/2009, interpretation of Section 73 of the Finance Act, 1994 regarding issuance of show-cause notice and imposition of penalties.

Analysis:
The appellant, a small-scale contractor, provided Maintenance and Repair Services to a company, collecting service tax but failing to remit it promptly. The jurisdictional Assistant Commissioner issued a show-cause notice for non-payment of service tax and proposed penalties under various sections of the Finance Act, 1994. The appellant did not reply, leading to an ex-parte order confirming the service tax, interest, and penalties. The appellant argued before the Commissioner (Appeals) that they had paid the tax, interest, and late fee before the notice, thus no penalties should apply as per Section 73 of the Finance Act, 1994. However, the appeal was rejected, prompting the appellant to file an appeal before the Appellate Tribunal CESTAT, Mumbai.

The appellant contended that the show-cause notice was not maintainable under Section 73(3) of the Finance Act, 1994, as they had already paid the service tax liability, interest, and late fee before the notice was issued. The department had issued the notice despite the appellant's compliance with the tax obligations. The Tribunal noted that Section 73(3) states that if the taxpayer pays the service tax before the notice is served, no penalties shall be imposed. The appellant had paid the tax liability, interest, and late fee promptly, indicating no willful misstatement or suppression of facts. Therefore, the issuance of the show-cause notice and imposition of penalties were unwarranted.

The Tribunal held that the imposition of penalties under Sections 76, 77, and 78 was not justified based on the appellant's compliance with the tax payment obligations. Consequently, the Tribunal set aside the penalties and allowed the appeal, providing consequential relief to the appellant. This judgment clarifies the application of Section 73 of the Finance Act, 1994 in cases where taxpayers fulfill their tax liabilities before the issuance of show-cause notices, emphasizing the importance of timely compliance to avoid unnecessary penalties.