2015 (11) TMI 1424 - AT - Service Tax

Levy of Penalty u/s 77 & 78 - - Site Preparation and clearance service - Assessee did not file ST-3 returns - Held that - Service tax for the period of April, 2010 to September, 2010 was paid by the appellant alongwith interest on 14/3/2011 and intimated to the department by filing the ST 3 returns on the same day is not under dispute. Though the audit has pointed out the delay payment of service tax in the month of April 2011 but the appellant had deposited service tax admittedly without any contest much before the issuance of show cause notice. Therefore in my considered view the case of the appellant squarely covered under provision under Section 73(3) of Finance Act, 1994 - the appellant is entitle for waiver of penalty imposed under section 77 and 78, therefore the said penalties are dropped - Decided in favour of assessee.

Summary

Issues Involved:
1. Imposition of penalty under Section 78 and Section 77 of the Finance Act, 1994 for late payment of service tax.

Analysis:
The appeal before the Appellate Tribunal CESTAT Mumbai challenged the Order-in-Appeal passed by the Commissioner (Appeals) upholding the Order-in-Original against the appellant for non-discharge of service tax liability and failure to file ST-3 returns for the period April 2010 to September 2010. The adjudicating authority confirmed a demand of Rs. 34,61,158, interest of Rs. 3,16,727, and late fee of Rs. 2000 against the total payment of Rs. 37,79,885 made by the appellant. Additionally, penalties of Rs. 10,000 under Section 77 and Rs. 34,61,158 under Section 78 were imposed. The appellant contended financial difficulties for the late payment but had paid the service tax and interest before any show cause notice was issued. The appellant's counsel argued that penalties should not be imposed as the service tax was paid before any notice, citing relevant circulars and case laws.

The appellant's counsel argued that the case was about late payment of service tax due to financial crises, with no intention to evade tax, as the tax was paid along with interest before any show cause notice was issued. The appellant had filed ST-3 returns on the same day as the payment. The counsel relied on Circular No. 137/167/2006-CX.4 and specific judgments to support the contention that penalties should not be imposed when the tax was paid before any notice. On the other hand, the Revenue's representative reiterated the findings of the impugned order, emphasizing that the appellant collected service tax but did not deposit it, indicating an intention to evade tax.

The Tribunal analyzed the submissions and found that the appellant had paid the service tax and interest before any contest and informed the department promptly, falling under the provisions of Section 73(3) of the Finance Act, 1994. The section allowed the payment of tax on the basis of self-ascertainment before a notice is served, preventing the imposition of penalties. Referring to relevant circulars and judgments, the Tribunal concluded that penalties under Section 77 and 78 should be waived as the appellant had paid the tax and interest before any show cause notice was issued. Therefore, the penalties were dropped, and the appeal was partly allowed, ruling in favor of the appellant.

In conclusion, the Tribunal found in favor of the appellant, ruling that penalties under Section 77 and 78 should be waived as the appellant had paid the service tax and interest before any show cause notice was issued, in accordance with the provisions of Section 73(3) of the Finance Act, 1994. The Tribunal's decision was based on the appellant's timely payment and compliance, leading to the dropping of the penalties imposed by the lower authorities.