2014 (1) TMI 827 - AT - Service Tax

Delay in payment of service tax - Industrial and Commercial Construction Service - Penalty u/s 76 - Suppression of facts - Held that - Tax was paid before the issue of the Show Cause Notice. There is no suppression of fact alleged against the appellant and the duty along with interest has been paid before the issue of Show Cause Notice. Therefore, provisions of Section 73(3) is applicable in this case and there was no case for issue of Show Cause Notice and imposition of penalty - Decided in favour of assessee.

Summary

Issues:
1. Delay in payment of service tax liability.
2. Imposition of penalty under Section 76 of the Finance Act, 1994.
3. Applicability of Section 73(3) of the Finance Act, 1994.

Issue 1: Delay in payment of service tax liability:
The appellant, engaged in providing Industrial and Commercial Construction Service, faced a delay in payment of the actual service tax liability during Apr.’07 to Sept.’07. The Revenue noticed a delay in payment of Rs.7,51,89,474/- during this period, which was discovered during an audit of the books of accounts. The appellant paid interest of Rs.6,54,217/- upon immediate notice of the delay. Subsequently, a Show Cause Notice was issued demanding the unpaid service tax, interest, and imposing a penalty under Section 76 of the Finance Act, 1994. The adjudication confirmed a demand of Rs.9,72,89,248/-, which was adjusted against the amount already paid by the appellant. Additionally, a penalty of Rs.11,84,050/- was imposed under Section 76.

Issue 2: Imposition of penalty under Section 76 of the Finance Act, 1994:
The appellant contested the penalty imposed under Section 76, claiming the delay was due to financial constraints and not intentional evasion. The appellant argued that the payments were reflected in their service tax return file, and there was no suppression of facts. The appellant cited the Karnataka High Court decisions in support of their plea. The Revenue, however, opposed the plea, asserting that the intention behind the delay is irrelevant for imposing penalties under Section 76. They argued that the belated payment, identified through audit, did not qualify as a voluntary payment as per Section 73(3) of the Finance Act, 1994. The Tribunal's decision in a similar case was cited by the Revenue.

Issue 3: Applicability of Section 73(3) of the Finance Act, 1994:
The Tribunal analyzed the submissions from both sides and noted that the decision relied upon by the Revenue did not establish that the tax was paid before the Show Cause Notice was issued. Moreover, the applicability of Section 73(3) was not considered in that case. In contrast, the decision referenced by the appellant's Counsel aligned with the facts of the case, emphasizing that no suppression of facts was alleged, and the duty along with interest was paid before the issuance of the Show Cause Notice. Consequently, the Tribunal concluded that Section 73(3) was applicable, and there was no basis for the Show Cause Notice and penalty imposition. The appeal was allowed, and the orders of the lower authority were set aside.

(Dictated and pronounced in open court)