2015 (11) TMI 330 - AT - Service Tax

Levy of penalty for delayed payment of service tax - Suppression of facts - appellants are engaged in the manufacture of Detergent Cakes/Powder, Scouring Powder/Bar and were procuring the raw material i.e. Linear Alkyl Benzene (LAB) from M/s.Reliance Industries Ltd., Gujarat to their unit at Ban Majra and Majra - appellants were on mistaken belief that M/s.Reliance was paying the eservice tax - Due tax along with interest paid before issuance of SCN - Held that - Appellants have paid service tax alongwith interest prior to issuance of show cause notice. Further, the service tax was voluntarily paid by them and the same was informed to the department vide their letter dated 7.6.2011. The Department has not been able to establish any suppression of facts with intention to evade payment of duty on the part of the appellant. In such situation, the imposition of penalty is not warranted. In CCE, Bangalore vs. Master Kleen- 2011 (9) TMI 788 - KARNATAKA HIGH COURT it has been held that no show cause notice could be issued for imposition of penalty when service tax alongwith interest is paid before issuance of show cause notice. Applying the ratio laid in the above case, and taking into consideration the facts presented, I am of the view that the penalty imposed is unjustified - impugned order is set aside - Decided against Revenue.

Summary

Issues: Imposition of penalty for non-payment of service tax on inward transportation of raw materials.

The judgment revolves around the imposition of a penalty on the appellants for failing to pay service tax on the inward transportation of raw materials. The appellants, engaged in manufacturing, procured raw material from a supplier and mistakenly believed that the service tax was being paid by the supplier. Upon realizing their liability, they voluntarily paid the service tax along with interest before a show cause notice was issued. The department alleged suppression of facts and imposed a penalty, which was partially reduced by the Commissioner (Appeals). The primary argument put forth was that the appellants had rectified the non-payment voluntarily and promptly informed the department about it. The Tribunal noted that the appellants had paid the service tax before the issuance of the show cause notice, and there was no evidence of intentional evasion. Citing a relevant case law, the Tribunal concluded that when service tax is paid along with interest before the notice is issued, no penalty should be imposed. Consequently, the penalty was deemed unjustified, and the impugned order was set aside, allowing the appeal with any consequential relief.

This judgment highlights the importance of voluntary compliance with tax obligations and the significance of timely rectification of errors. It underscores that the absence of intent to evade payment, coupled with proactive steps to fulfill tax liabilities, can be pivotal in challenging penalties imposed by tax authorities. The case serves as a precedent for situations where taxpayers rectify inadvertent errors promptly, showcasing that penalties may not be warranted in such circumstances.