2015 (5) TMI 667 - AT - Service Tax

Penalty u/s 76, 77 & 78 - Levy of late fee for delayed filing of return - Delay in payment of service tax - Held that - Appellant had discharged the service tax liability along with interest thereon much before the issue of show-cause notice and therefore, the provisions of Section 73(3) should have been given effect to, and the matter should have been closed. As the show-cause notice has been issued much after the payment of statutory liabilities, there was no reason to issue the notice except for imposition of penalties. In view of the specific provisions incorporated in Section 73(3) of the Finance Act, 1994, the imposition of penalties is clearly not warranted. Accordingly, I set aside the same and allow the appeal. I make it clear that only penalties under Sections 76, 77 & 78 of the Finance Act, 1994 have been set aside. There is no provision for waiver of late fee required to be paid under Rule 7 (c) of the Service Tax Rules, 1944 and the appellant is liable to discharge the same - Decided partly in favour of assessee.

Issues:
1. Confirmation of service tax demand by lower appellate authority.
2. Imposition of penalties under Sections 76, 77 & 78 of the Finance Act, 1994.
3. Applicability of Section 73(3) of the Finance Act in the case.
4. Consideration of penalties in light of payment of statutory liabilities.

Confirmation of Service Tax Demand:
The appeal stemmed from an Order-in-Appeal confirming a service tax demand of &8377;12,32,434/- along with interest imposed by the Joint Commissioner of Central Excise, Customs & Service Tax, Nagpur. The appellant had discharged the service tax liability and interest much before the issuance of the show-cause notice, prompting a challenge to the imposition of penalties.

Imposition of Penalties:
Penalties under Sections 76, 77 & 78 of the Finance Act, 1994 were imposed on the appellant by the lower authorities. The appellant argued that as per Section 73(3) of the Finance Act, proceedings should have been closed upon discharge of tax liability prior to the notice issuance, thus rendering the penalties unwarranted. The Assistant Commissioner representing the Revenue reiterated the lower authorities' stance.

Applicability of Section 73(3) of the Finance Act:
The appellant contended that the provisions of Section 73(3) should have been applied, leading to the closure of proceedings due to the discharge of tax liability and interest before the issuance of the show-cause notice. The appellant's plea was based on the argument that penalties were unnecessary given the timely payment of statutory obligations.

Consideration of Penalties in Light of Payment of Statutory Liabilities:
The Tribunal acknowledged that the appellant had settled the service tax liability and interest well before the show-cause notice was issued, emphasizing the relevance of Section 73(3) of the Finance Act. Consequently, the Tribunal set aside the penalties under Sections 76, 77 & 78 of the Finance Act, 1994, highlighting that penalties were not justified in this scenario. However, it clarified that the appellant remained liable to discharge late fees as per Rule 7(c) of the Service Tax Rules, 1944, indicating that only penalties under specific sections of the Finance Act were waived.

This detailed analysis encapsulates the key issues addressed in the judgment, emphasizing the application of relevant legal provisions and the Tribunal's decision regarding the imposition of penalties in light of the appellant's compliance with statutory obligations.

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