2015 (11) TMI 1186 - AT - Service Tax

Levy of penalty - Appellant have deposited the payment of service tax and interest and intimated to the department on 23/2/2010 i.e. which is before the issuance of show cause notice which was issued on 29/2/2012. - Transportation charges - Reverse charge mechanism - Held that - when the service tax alongwith interest admittedly paid immediately after pointed out by the officers, show cause notice should not have been issued in terms of Section 73(3) of Finance Act, 1994 - no show cause notice should have been issued and consequently no penalty should have been imposed - Levy of penalty set aside. - Decided in favor of assessee.

Summary

Issues:
1. Appeal against Order-in-Appeal upholding Order-in-Original and rejecting the appellant's appeal.
2. Non-payment of service tax on transportation charges.
3. Imposition of penalties under Section 76 and 78 of the Finance Act, 1994.
4. Request for waiver of penalties under Section 76 and 78.
5. Appellant's failure to appear during the hearing.
6. Allegation of incorrect declaration of freight amount in ST3 returns.
7. Interpretation of Section 73(3) of the Finance Act, 1994 regarding issuance of show cause notice.

Analysis:
1. The appeal was filed against the Order-in-Appeal upholding the Order-in-Original and rejecting the appellant's appeal. The appellant, engaged in the manufacture of Sugar and Molasses, was found to have not paid service tax amounting to Rs. 3,58,615 on transportation charges during a specific period. The Commissioner(Appeals) confirmed the charges proposed in the show cause notice, leading to the rejection of the appellant's appeal.

2. The appellant's failure to appear during the hearing prompted the Tribunal to proceed with deciding the appeal on merit. The Revenue asserted that the appellant had not declared the correct freight amount in the ST3 returns, alleging suppression of facts and justifying the imposition of penalties under Section 76 and 78 of the Finance Act, 1994.

3. The Tribunal considered the submissions made by the Revenue and examined the record. It was noted that the appellant had deposited the service tax and interest before the issuance of the show cause notice. Referring to Section 73(3) of the Finance Act, 1994, the Tribunal highlighted that if the service tax and interest were paid by the assessee before the issuance of a notice, no show cause notice should have been issued.

4. Citing precedents such as the cases of Santhi Casting Works and Tidewater Shipping Private Ltd., the Tribunal emphasized that penalties should not be imposed when the service tax and interest are paid voluntarily and intimated to the department before the issuance of a show cause notice. In line with the interpretation of Section 73(3) and the relevant judgments, the Tribunal concluded that the show cause notice should not have been issued, and thus, no penalty should be imposed.

5. Consequently, the Tribunal allowed the appeal, waiving the penalties under Section 76 and 78. However, it maintained the payment of service tax along with interest. The decision was pronounced in court, reflecting the Tribunal's interpretation of the law and the application of relevant precedents to the case at hand.