2015 (1) TMI 285 - AT - Service Tax

Penalty u/s 76, 77 & 78 - Commercial or Construction Services - entire duty liability along with interest was paid before issue of show cause notice - Held that - Appellant was discharging tax liability up to September 2004 and thereafter stopped making the payment of Service Tax No ST-3 returns was filed by the appellant after September 2004. Once appellant was aware of the fact that service tax on the services provided was paid earlier, it cannot be considered that there was no intention to evade payment of tax by suppression when appellant was not even filing the statutory returns of the tax which he was paying earlier. Accordingly, it is held that penalties under Section 78 of the Finance Act, 1994 is imposable. As per the provisions contained in Section 73 of the Finance Act, 1994, during the relevant period, if an appellant pays the entire service tax along with interest including 25% of the Section 78 penalty then no show cause notice was required to be issued and proceedings are considered as concluded. Where no show cause notice is required to be issued then penalties under Section 76 and 77 of the Finance Act, 1994 also get waived and no show cause notice is required to be issued for imposition of such penalties - Decided partly in favour of assesse.

Summary

Issues:
Appeal against OIA No. 152-2013-STC-SKS-COMMR(A)AHD dated 19.07.2013 - Imposition of penalties under Section 78 of the Finance Act, 1994 - Applicability of CBEC Circular F.No. 137/167/2006-CX-4 dated 03.10.2007 - Interpretation of Section 73(4A) of the Finance Act, 1994.

Analysis:

Issue 1: Imposition of Penalties under Section 78 of the Finance Act, 1994
The appellant contended that the duty liability with interest was paid before the show cause notice, hence penalties should not apply as per CBEC Circular F.No. 137/167/2006-CX-4 dated 03.10.2007. The argument was supported by various case laws. However, the Revenue defended the lower authorities' orders. The Tribunal noted that the appellant stopped making tax payments and filing ST-3 returns after September 2004, despite being aware of the tax liability. It was held that penalties under Section 78 were imposable as the appellant failed to file statutory returns despite paying taxes earlier. The case laws cited by the appellant were deemed inapplicable to the current case.

Issue 2: Interpretation of Section 73(4A) of the Finance Act, 1994
The Tribunal analyzed Section 73 of the Finance Act, 1994, which states that if an appellant pays the entire service tax, interest, and 25% of the penalty under Section 78, no show cause notice is required. Referring to the Karnataka High Court's judgment in a similar case, it was emphasized that penalties under Sections 76 and 77 would also be waived if no show cause notice was necessary. The Tribunal highlighted a case where the penalty was refunded as the tax was paid before the show cause notice. It was clarified that Section 73(4A) does not apply to cases of suppression of facts or willful misstatement, and penalties under Section 78 could still be levied. However, the penalty amount was restricted to 25% if the tax and interest were paid before the proceedings commenced.

Conclusion:
The appeal was partly allowed, modifying the penalty to 25% of the amount levied by the Assessing Authority. The Tribunal rejected the appeal for imposing the full penalty under Section 78, as 25% of the penalty was payable by the appellant due to payment of the entire service tax and interest before the show cause notice. The decision was based on the payment made before the initiation of proceedings, limiting the liability to 25% as per the statutory provision.