2015 (7) TMI 33 - AT - Service Tax

Penalties under Sections 76, 77 and 78 - GTA services - Held that - From the records it is seen that the issue relates to short-payment of service tax on GTA services. As soon as the same was pointed out, the appellant willingly and voluntarily discharged the service tax liability along with interest on 23/11/2009. Therefore, the matter should have been closed there itself. Section 73(3) of the Finance Act, 1994 provides for closure of all proceedings in a case where service tax liability along with interest is discharged by the appellant on his own or on being pointed out by the department. In spite of the specific provisions, department has proceeded to keep the matter alive by issuing the show cause notice without any rhyme or reason. In any case, the authorities should have waived the penalty by exercising the discretion under Section 80 of the Finance Act, 1994. - Decided in favour of assessee.

Summary

Issues:
Imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994 for delayed payment of service tax along with interest.

Analysis:
The appeal was against the Order-in-Appeal passed by the Commissioner of Central Excise & Customs (Appeals), Nagpur, upholding penalties on the appellant for delayed payment of service tax. The appellant, M/s. Shridhar Castings Pvt. Ltd. Nagpur, had a short-payment of service tax for GTA services, which they rectified upon audit findings by discharging the tax liability with interest. The appellant argued that proceedings should have been closed as per Section 73(3) of the Finance Act, 1994, and penalties should be waived under Section 80. The Revenue, represented by the Superintendent (AR), supported the lower authorities' decision.

Upon review, the Tribunal noted that the appellant promptly rectified the short-payment upon discovery and discharged the tax liability with interest voluntarily. Section 73(3) of the Finance Act, 1994 mandates closure of proceedings when the appellant settles the tax liability. The Tribunal criticized the department for unnecessarily issuing a show cause notice after the appellant's compliance. It was emphasized that the authorities should have exercised discretion under Section 80 to waive penalties. Consequently, the Tribunal allowed the appeal, setting aside the penalties imposed on the appellant, citing the discretion under Section 80 of the Finance Act, 1994.

In conclusion, the Tribunal ruled in favor of the appellant, highlighting the procedural errors by the department in pursuing penalties despite the appellant's timely rectification of the tax liability. The decision underscored the importance of adhering to statutory provisions and exercising discretion appropriately under the Finance Act, 1994.