2013 (12) TMI 433 - AT - Service Tax

Penalty u/s 76 - Discrepancy in ST-3 return - Duty discharged before show cause notice was issued - Held that - assessee on being pointed out by the authorities for not paying the service tax, has paid the service tax with interest even before the issue of show cause notice. Sub-section (3) of Section 73 of the Finance Act, 1994, categorically states that if tax and interest is paid and the same is informed to the authorities, then the authorities shall not serve any notice calling upon the authorities to pay penalty. It is unfortunate that inspite of statutory provisions, the authorities have issued a show cause notice claiming penalty. So, tax and interest was paid before issue of show cause notice - Therefore, impugned order is liable to be set aside - Decided in favour of assessee.

Summary

Issues:
Challenge against imposition of penalty under Section 76 of the Finance Act, 1994.

Analysis:
The appeal was filed against Order-in-Appeal No.75/BOL/2011 dated 24.06.2011. The appellant provided taxable services under commercial or industrial construction service and manpower recruitment agency service. The adjudicating authority demanded a differential amount of Service Tax of Rs.15,42,052/- along with interest and imposed penalties under Sections 76 and 78 of the Finance Act, 1994. The Ld. Commissioner(Appeals) upheld the order-in-original but set aside the penalty under Section 78. The appellant challenged the penalty under Section 76, arguing that they regularly paid Service Tax, faced financial hardship, paid the differential amount before the show cause notice, and cited relevant judgments supporting their case.

The Ld. A.R. for the Revenue contended that the appellant did not disclose the full taxable amount in their returns, leading to the penalty for delayed payment of Service Tax. After hearing both sides and examining the records, it was noted that the appellant had paid the entire Service Tax liability and interest before the show cause notice. The provisions of sub-section (3) of section 73 of the Finance Act, 1994 were analyzed, which state that no penalty can be imposed if the tax and interest are paid before the notice.

The judgment referred to various cases supporting the appellant's position, emphasizing that if the entire amount of Service Tax liability and interest is paid before the issuance of the show cause notice, no penalty should be imposed. The High Court's decision in the case of CCE & ST, LTU, Bangalore v. Adecco Flexione Work Force Solutions Ltd. supported this stance. Additionally, the judgment in the case of Commissioner of Service Tax, Bangalore vs. Master Kleen highlighted that if tax and interest are paid before the show cause notice, no penalty should be imposed. Following these precedents, the impugned order was set aside, and the appeal was allowed.

In conclusion, the judgment emphasized that if the Service Tax liability and interest are paid before the issuance of the show cause notice, no penalty should be imposed under Section 76 of the Finance Act, 1994. The decision was based on established legal principles and precedents, ensuring that penalties are not levied when the tax and interest obligations are fulfilled in a timely manner.