2014 (5) TMI 954 - AT - Service Tax

Waiver of pre-deposit - demand based on ST-3 return - availing abatement under Notification No. 1/2006 while availing cenvat credit - validity of show cause notice where service tax deposited before issuance of SCN - extended period of limitation - Penalty - Held that - Once, it is reflected in the ST3 returns, suppression cannot be invoked. The second aspect is misdeclaration which would arise only if the figures indicated are wrong. There is no evidence of both in the case. Therefore, this would be a case of demand based on the ST-3 returns and therefore extended period cannot be invocable. As regards the second issue viz. availment of Cenvat credit more than what was allowed by statute, prima facie, it appears, this also would have been incorporated in the ST-3 returns and ST-3 returns would have clearly shown that the appellant had availed excess credit. In this view of the matter, in our opinion, by making payment of the entire amount due with interest, the appellants have discharged their liability as per the provisions of Section 73(3) which provides that where the appellant makes payment of tax with interest, no show cause notice shall be issued unless the case is covered by situations where extended period of 5 years can be invoked for issue of show cause notice such as evasion of duty or non-payment of duty because of suppression of facts, misdeclaration/collusion, etc - appellant has made out a prima facie case in their favour for non-issue of show cause notice and non-imposition of penalty under Section 78 of the Finance Act, 1994 - Stay granted.

Summary

Issues: Whether the appellant is liable to pay a penalty under Section 78 of the Finance Act, 1994.

Analysis:
1. The appellant contended that the case falls under Section 73(3) of the Finance Act, 1994, as they had paid the entire amount due with interest before the show cause notice was issued. The demand primarily related to two issues: first, the eligibility for abatement under Notification No. 1/2006, which the appellant admitted they were not eligible for and reversed the amount accordingly; second, the availment of Cenvat credit exceeding the permissible limit for payment of service tax, which was also reversed by the appellant.

2. The Additional Commissioner argued that suppression was discussed in the adjudication order, and the appellant's claim of a mistake by the account handler was not accepted. However, the Tribunal noted that if the abatement had been availed by the appellant, it would have been reflected in the ST-3 returns, precluding the invocation of suppression. Similarly, there was no evidence of misdeclaration in the case, making it a demand based on the ST-3 returns and not invoking the extended period.

3. The Tribunal found that the appellant had made a prima facie case in their favor for non-issuance of a show cause notice and non-imposition of penalty under Section 78 of the Finance Act, 1994. By paying the entire amount due with interest, the appellant fulfilled their liability as per Section 73(3), which prohibits the issuance of a show cause notice unless specific conditions warranting an extended period are met, such as evasion of duty or suppression of facts.

4. Considering the complexity of the case and the need for further examination during the final hearing, the Tribunal granted a waiver of pre-deposit of dues and stayed the recovery during the appeal's pendency, emphasizing that detailed considerations and correspondence between the Department and the appellant would be crucial in the final decision-making process.