2015 (5) TMI 175 - AT - Service Tax

Penalty u/s 78 - Duty paid after pointed out by Revenue - Held that - Respondent had discharged the entire service tax liability and interest thereof as soon as it was pointed out by the departmental officers during the scrutiny of the records. In our view, if an assessee has discharged service tax liability and interest thereof on being pointed out by the departmental officers; the case would fall under the provisions of Section 73(3) of the Finance Act, 1994. - there was no need for issuance of any show cause notice to the respondent. - first appellate authority has used discretionary power granted by the statute under Section 80 of the Finance Act, 1994 to set aside the penalties imposed under Section 78. It is settled law that discretionary powers exercised by the first appellate authority need not be questioned unless such powers are used perversely. In the case in hand, we find that the first appellate authority has used the powers granted under Section 80 very judicially and has correctly set aside the penalty imposed. - Decided against Revenue.

Summary

Issues: Setting aside penalty under Section 78 of the Finance Act, 1994 by the first appellate authority.

Analysis:
1. The appeal was filed by the Revenue against the Order-in-Appeal passed by the Commissioner of Central Excise (Appeals). Despite the absence of the respondent, the appeal was taken up for disposal.

2. The Revenue contended that the first appellate authority erred in setting aside the penalty imposed under Section 78 of the Finance Act, 1994. The appellant had not paid the service tax for more than three years after the levy introduction, which could not be considered as ignorance of the law. The penalties were set aside as the appellant paid the service tax only after being pointed out by the department.

3. The Tribunal found that the main issue was the setting aside of the penalty by the first appellate authority. The adjudicating authority had imposed an equivalent penalty under Section 78. However, the first appellate authority justified setting aside the penalty, which was considered reasonable by the Tribunal.

4. It was undisputed that the appellant discharged the entire service tax liability and interest as soon as it was pointed out by the departmental officers during record scrutiny. This action fell under Section 73(3) of the Finance Act, 1994, which does not require issuance of a show cause notice if the tax liability is discharged on being pointed out by the authorities.

5. The Tribunal also considered the discretionary powers used by the first appellate authority under Section 80 of the Finance Act, 1994. It was noted that such discretionary powers need not be questioned unless used perversely. In this case, the first appellate authority exercised its powers judiciously in setting aside the penalties imposed under Section 78.

6. Ultimately, the Tribunal found no merit in the appeal and rejected it, affirming the decision of the first appellate authority to set aside the penalty under Section 78 of the Finance Act, 1994.