2013 (11) TMI 1408 - AT - Service Tax

Rectification of mistake - Suppression of Service tax - Assessee contends that there was no allegation for suppression of service tax - Benefit u/s 73(3) - Whether interest paid can invoke penalty imposed - Held that - for availing the benefit of Section 73(3) what is required is payment of disputed service tax amount before issue of show-cause notice. Explanation (1) is to the effect that interest will be payable. There is no provision that interest should be paid before issue of the show-cause notice as it was there in Section 73(1a) of the Act which stood at the relevant time - Section 73(3) clearly provides that notice shall not be issued in respect of amount so paid implying that if any short-fall is noticed, notice can be issued only for recovering such shortfall and not in respect of tax paid by the assessee before issue of SCN - Therefore, order passed by the Tribunal needs correction - So the Show Cause Notice issued and penalty levied are not maintainable in law - Rectification allowed.

Issues: Rectification of mistake in final order regarding penalty imposition under Section 76 of the Finance Act, 1994 for delay in payment of service tax.

Analysis:
1. The applicant sought rectification of a mistake perceived in the final order regarding the imposition of a penalty under Section 76 of the Finance Act, 1994 for a delay in paying service tax. The original finding in para 14 of the order suggested suppression due to delayed payment, leading to the refusal of benefits under Section 73(1A) or Section 73(3) as the penalty was not paid before the show-cause notice (SCN) issuance.

2. The case involved a delay in service tax payment, with subsequent payments made upon notification by the Department. Despite paying the demanded amounts, a show-cause notice was issued for penalties under Section 76. The applicant contested the penalty imposition but not the tax and interest amounts demanded, arguing against the suppression element for penalty imposition.

3. The dispute arose from the finding in para 14 that implied suppression due to delayed tax payment, barring the benefit of Section 73(1A) or 73(3) as penalty prepayment was not made. The applicant challenged this finding, highlighting the absence of suppression allegations in the show-cause notice and no penalty under Section 78 imposed, questioning the basis for the penalty imposition.

4. The applicant's counsel argued against the finding of suppression, emphasizing the absence of such allegations in lower authorities' decisions and the lack of penalty under Section 78. The counsel contended that the Tribunal erred in determining suppression without prior notice, urging the reversal of the finding and subsequent penalty imposition.

5. The Revenue representative opposed the rectification, citing the applicant's incomplete payment for Section 73(3) benefits and alleging suppression for collecting but not remitting service tax. Referring to legal precedents, the representative supported the original penalty imposition, asserting the correctness of the Tribunal's decision based on the non-compliance with payment requirements.

6. After reviewing both parties' arguments and the case records, the judge noted the absence of suppression allegations in the show-cause notice, rendering the finding of suppression untenable. The judge emphasized that without prior notification and adjudication on suppression, such a finding at the appellate stage was unjustified, distinguishing the case from precedents involving penalty under Section 78.

7. The judge interpreted Section 73(3) requirements, emphasizing the need for disputed tax payment before the SCN issuance, without a precondition for interest payment at that stage. Highlighting the provision's restriction on issuing notices for already paid amounts, the judge concluded that the penalty imposition based on incomplete payment was erroneous, necessitating a correction of the Tribunal's order.

8. Consequently, the judge allowed the rectification application, replacing paras 14 to 17 of the final order with findings absolving the applicant of suppression allegations and setting aside the penalty under Section 76. The rectification order was pronounced in open court, correcting the erroneous penalty imposition based on the clarified interpretation of Section 73(3) requirements.

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