2013 (3) TMI 224 - AT - Service Tax

Penalty - Payment of service tax before issuance of show cause notice - section 73(3) - held that - it is a mandate of the Act that if any assessee does not pay service tax in time and does not file the return in time, but later on, on their own ascertainment they pay service tax along with interest and file the return and inform the department in writing, in that case show cause notice is not required to be issued. Same has been clarified by the Board circular. - No merit in the impugned order qua imposition of penalty on the appellant. - Decided in favor of assessee.

Summary

Issues:
Penalty under Section 76 & 77 of the Finance Act, 1994 confirmed against the appellant.

Analysis:
The appellant was in appeal against an order confirming penalties under Section 76 & 77 of the Finance Act, 1994. The appellant, a service tax registrant, had not filed service tax returns or paid service tax for the period October 2008 to March 2009 in time. However, on their own ascertainment on 17.12.2009, the appellant filed the returns and paid the entire service tax along with interest. A show-cause notice was issued on 15.4.2010, and penalties under Section 76 & 77 were imposed. The appellant contended that as per Section 73(3) of the Finance Act, 1994, a show-cause notice was not required to be issued to them, citing a Board circular. The respondent argued against this, stating that allowing such activities would discourage timely tax payments. The provisions of Section 73(3) were examined, which state that if an assessee pays service tax on their own ascertainment before a notice is served, no show-cause notice is required. The Board circular supported this interpretation. As the appellant had paid the tax and filed returns without the need for a notice, the imposition of penalties was found unjustified. The appellate tribunal set aside the penalties imposed, ruling in favor of the appellant.

Therefore, the main issue of the appeal was the imposition of penalties under Section 76 & 77 of the Finance Act, 1994, which were set aside based on the provisions of Section 73(3) and the Board circular cited. The tribunal found that as the appellant had paid the service tax on their own ascertainment without the need for a show-cause notice, the penalties were unwarranted. The decision highlights the importance of timely tax payments and the legal provisions allowing for self-ascertainment and payment of tax without the necessity of a formal notice.