2014 (9) TMI 253 - AT - Service Tax

Levy of penalty for belated payment of service tax - penalty u/s 76 - appellant has discharged the service tax liability along with interest albeit belatedly and was done on his own - Held that - having discharged the service tax liability which is not modified by the lower authorities, the provisions of Section 73 (3) of the Finance Act, 1994 will come into play as there is no allegation in the show cause notice that there is an intention to evade payment of service tax liability. Reliance is placed on decision of the Karnataka High Court in Adecco Flexione Workforce Solution Limited 2011 (9) TMI 114 - KARNATAKA HIGH COURT Karnataka and in CST, Banglore vs. Ahead Info Technologies India Pvt. Limited - 2014 (8) TMI 785 - KARNATAKA HIGH COURT . In these pronouncements, the Karnataka High Court enunciated the principle that where an assessee has paid both the service tax and interest before issuance of a show cause notice under the Act, subsection 3 of section 73 of the Act, prohibits initiation of proceedings for recovery of penalty. When there is a finding of fact that this was not a case of non-payment of Service Tax with intent to evade the payment of the same, question of applying Subsection (4) of Section 73 of the Finance Act, 1994 and resultantly exclusion of application of Subsection (3) thereof, would not arise. - no penalty - decided in favor of assessee.

Summary

Issues:
Imposition of penalty under Section 76 of the Finance Act, 1994 for belated payment of service tax liability.

Analysis:

Issue 1: Imposition of penalty under Section 76 of the Finance Act, 1994

The appellant belatedly paid the service tax liability along with interest, leading to a show cause notice for penalty under Section 76 of the Finance Act, 1994. The appellant argued that the penalty should not be imposed as there was no intention to evade payment, citing judgments from the Hon'ble High Courts of Gujarat and Karnataka. The Tribunal considered the submissions and records, noting that the appellant had discharged the service tax liability on their own. The Tribunal applied Section 73(3) of the Finance Act, 1994, as there was no allegation of intent to evade payment. Reference was made to the judgment of the Hon'ble High Court of Gujarat in a similar case, emphasizing that penalty should not be imposed when tax was paid before the show cause notice, as per Section 73(3). The Tribunal held that since there was no intent to evade payment, the provisions of Section 73(4) did not apply, and the penalty was set aside following the precedent of the Karnataka High Court.

In conclusion, the judgment by the Appellate Tribunal CESTAT AHMEDABAD addressed the issue of imposing a penalty under Section 76 of the Finance Act, 1994 for belated payment of service tax liability. The Tribunal considered the appellant's arguments, relevant legal provisions, and precedents from High Courts to decide that the penalty should not be imposed due to the absence of intent to evade payment. The decision was based on a thorough analysis of the facts and legal principles, ultimately setting aside the penalty and allowing the appeal.