2014 (8) TMI 55 - AT - Service Tax

Waiver of penalty u/s 73(3) where service tax with interest deposited beofore issuance of Show Cause Notice - Availment of CENVAT Credit twice - Penalty u/s 78 - Held that - once a person is in default and if he makes the payment of service tax and interest and subsequently the department finds that such payment had arisen because of miss-declaration or suppression, no action can be taken even if there is a deliberate intention to evade tax. The provisions of sub-section 4 is to ensure that just because someone pays the tax and interest, he does not escape from other liabilities which arise in the case of evasion of tax who have not followed the law. - once the amount is paid with interest, show-cause notice could not have been issued for imposition of penalty. In any case for imposition of penalty there is no specific time limit laid down in the law. Another fact that has to be taken into account is the provision in the law that when there is suppression of facts or misdeclaration etc. where extended period can be invoked, an assessee could pay service tax plus interest and 25% of the service tax towards penalty before issue of show-cause notice. This is an alternative which is provided in the law itself to allow assessees to correct the mistakes/omissions and escape penalty of 100% under Section 78 by making payment with interest and 25% of the service tax with interest before the issue of show-cause notice. That being the position if the issue like the one before us is allowed and if the submission is accepted, we would be rendering this provision which provides for payment of 25% of service tax towards penalty otiose. - Decided against assessee.

Summary

Issues:
- Penalty under Section 78 of the Finance Act 1994

Analysis:
1. The case primarily revolves around the imposition of a penalty under Section 78 of the Finance Act 1994. The appellant had taken excess credit resulting in the utilization of CENVAT credit beyond the permissible limit. The Revenue contended that this was a deliberate act to overcome financial difficulties. Subsequently, proceedings were initiated for imposing a penalty of Rs. 17,12,376 against the appellant.

2. The appellant argued that as per Section 73(3) of the Finance Act 1994, once the entire service tax and interest are paid, a show-cause notice cannot be issued thereafter. The appellant claimed that the notice issued beyond one year after the payment was invalid. However, the Revenue argued that the case falls under Section 73(4) due to short payment of service tax over a period, making the notice valid.

3. The Tribunal analyzed the provisions of Section 73(3) and (4) in detail. It was noted that Section 73(4) applies when service tax has not been levied or paid, which was the case here due to the excess credit taken by the appellant. The Tribunal emphasized that Section 73(4) prevents defaulters from evading penalties by merely paying the tax and interest, ensuring accountability for deliberate actions to evade tax obligations.

4. Additionally, the Tribunal highlighted another provision in the law allowing assessees to pay service tax, interest, and 25% of the service tax as penalty before the issue of a show-cause notice in cases of suppression of facts. This provision aims to provide an opportunity for rectification and penalty mitigation. By rejecting the appellant's arguments, the Tribunal upheld the importance of these provisions to maintain tax compliance and deter intentional evasion.

5. Ultimately, the Tribunal concluded that the appellant's deliberate act of taking excess credit warranted the penalty imposed under Section 78. The Tribunal found no merit in the appellant's arguments regarding the timing of the show-cause notice issuance and the applicability of penalty provisions. Consequently, the appeal was rejected, affirming the penalty under Section 78 of the Finance Act 1994.

6. The judgment was delivered after considering the submissions from both sides, emphasizing the importance of statutory provisions to uphold tax compliance and accountability. The decision serves as a reminder of the consequences of deliberate actions to evade tax liabilities and the significance of adhering to legal requirements to avoid penalties.