2012 (8) TMI 74 - AT - Service Tax

Penalty - payment of entire amount of service tax liability and interest thereof before the issuance of show cause notice Held that - Provisions of the section 73(1A) of the Finance Act, 1994 will apply in full force in this case, as there is payment of entire amount of service tax liability and interest thereof before the issuance of show cause notice - penalties under Sections 76 and 78 in excess of the 25% of the amount of penalty paid by the appellant set aside

Summary

Issues:
Appeal against confirmation of service tax liability, interest, and penalties under the Finance Act, 1994.

Analysis:
The appellant accepted the liability to pay service tax on business auxiliary services, depositing the entire amount along with interest before the show cause notice. Additionally, 25% of the service tax liability was paid after the issuance of the Order-in-Original. The Circular No. 137/167/2006-CX-4 clarifies that if the taxpayer pays the service tax liability along with interest and a penalty equal to 25% of the service tax amount within a month of the show cause notice, the adjudication proceeding can conclude. This provision applies in cases where the taxpayer voluntarily deposits the service tax. The law mandates the conclusion of all proceedings under the Finance Act, 1994 against the taxpayer in such cases.

The Tribunal found that the provisions of section 73(1A) of the Finance Act, 1994 apply in full force since the entire service tax liability and interest were paid before the show cause notice. Consequently, the Tribunal set aside the penalties imposed under Sections 76 and 78, exceeding 25% of the penalty amount paid by the appellant. The Tribunal concluded that the proceedings initiated for penalties under various sections should be set aside based on the voluntary payment of the service tax liability and interest before the show cause notice.

Therefore, the Tribunal disposed of the appeal by setting aside the penalties imposed under Sections 76 and 78, in excess of the 25% penalty amount paid by the appellant. The judgment reaffirms the applicability of Circular No. 137/167/2006-CX-4 and the legal principle that the conclusion of proceedings under sections 73(1A) and (3) of the Finance Act, 1994 implies the conclusion of all proceedings under the Act against the taxpayer who voluntarily deposits the service tax.