2014 (8) TMI 548 - AT - Service Tax

Waiver of penalty where service tax has been deposited before issuance of SCN - assessee exceeded small scale exemption limit - Held that - Section 73(3) not only covers the cases of payment of service tax on an assessee s own ascertainment but also on the basis of tax ascertained by the Central Excise officers before service of the notice - the amount of Service Tax of ₹ 68,424/- paid prior to issue of the SCN can be held to have been paid under Section 73(3) of the Act. There is no provision in the said Section not to cover cases where returns may not have been filed. As such, equal penalty imposed in respect of the said amount of ₹ 68,424/- is set aside. As far as the amount of ₹ 34,212/- paid after the issue of the SCN, the penalty is imposable as this has been paid after the issue of SCN. The provisions of Section 80 will also not apply to a case, such as this, where the appellants have taken registration - Penalty reduced - Decided partly in favour of assessee.

Summary

Issues:
1. Whether penalty imposed on the appellants should be waived under Section 73(3) and 80 of the Finance Act, 1994.

Analysis:
1. The appellants, a small taxpayer, had crossed the small scale exemption limit in 2005-06 and voluntarily came forward to pay the service tax amount in three equal instalments as orally allowed by jurisdictional officers. However, before the third instalment, a show-cause notice was issued. The appellants paid the third instalment before the adjudication order and also paid interest. The advocate argued for a lenient view under Section 73(3) and 80 of the Finance Act, 1994, to waive the penalty.

2. The Departmental Representative (DR) contended that since the appellants were registered, they cannot plead ignorance about tax liability. Additionally, as the appellants had not filed service tax returns, it was considered a case of suppression, justifying the equal penalty imposed.

3. The judgment held that Section 73(3) covers cases where service tax is paid on the assessee's own ascertainment or on the basis of tax ascertained by Central Excise officers before notice. The amount paid prior to the show-cause notice was considered to have been paid under Section 73(3), leading to setting aside the equal penalty imposed on that amount. However, the penalty on the amount paid after the show-cause notice was upheld, as Section 80 did not apply in this case due to the appellants' registration status.

4. Consequently, the appeal was partly allowed, reducing the penalty to Rs. 34,212 for the amount paid after the show-cause notice, as the provisions of Section 80 did not apply in their situation.