2014 (1) TMI 1609 - AT - Service Tax

Waiver of pre-deposit of penalties - Business auxiliary service and cargo handling service - Held that - Provisions of Section 73(3) of the Finance Act are interpreted by the High Court in the case of Adecco Flexione Workforce Solutions Ltd. (2011 (9) TMI 114 - KARNATAKA HIGH COURT). As per the provisions of Section 73(3) of the Finance Act, where the tax has been paid along with interest, no notice shall be served. In the present case as the service tax along with interest has been paid before issuance of the show cause notice. The provisions of Section 73(3) of the Finance Act prohibit issuance of show cause notice for recovery of penalties. I find that in the present case there is no allegation of suppression, therefore the impugned order whereby the penalties under Sections 76, 77 and 78 of the Finance Act are imposed, are set aside - Stay granted.

Summary

Issues:
Application for waiver of pre-deposit of penalties; Challenge on imposition of penalties under Sections 76, 77, and 78 of the Finance Act.

Analysis:
The judgment deals with an application for waiver of pre-deposit of penalties where the duty along with interest had already been paid before the issuance of the show cause notice. The applicants were not disputing the demand of service tax and interest but were specifically contesting the imposition of penalties under Sections 76, 77, and 78 of the Finance Act. The Tribunal decided to take up the appeal at the stay stage since the issue primarily revolved around the imposition of penalties.

The appellants contended that the Audit party had raised objections regarding service tax on business auxiliary service and cargo handling service, which led to the immediate payment of the service tax along with interest by the appellants. Subsequently, a show cause notice was issued for the appropriation of the already paid amount and for the imposition of penalties. The appellants relied on a decision by the Hon'ble Karnataka High Court in a specific case to argue that when service tax is paid along with interest upon the Revenue's notification, the imposition of penalties is not justifiable.

Furthermore, the Revenue argued that the penalties were rightfully imposed as the appellants had not disclosed to the Revenue their provision of business auxiliary service and cargo handling service. However, the Tribunal referred to the interpretation of Section 73(3) of the Finance Act by the Hon'ble High Court in a particular case and concluded that when tax is paid along with interest before the issuance of a show cause notice, no further notice for penalties should be served. Since there was no allegation of suppression in the present case, the penalties imposed under Sections 76, 77, and 78 of the Finance Act were set aside, and the appeal was allowed accordingly. The stay petition was also disposed of in the same terms, in favor of the appellants.