2015 (12) TMI 606 - AT - Service Tax

Levy of penalty - Transport of Goods through Road service and Construction of Residential Complex - Transfer of ready mix concrete - Held that - Scope of new tax entry though clarified by the CBSE Circular dated 27.07.2005, bringing the appellants liable to service tax under sub-clause (zzz) of Section 65 (105) of the Finance Act, 1994. But, it was not clear to them and there was no malafide intention for non-payment of service tax. In view of the provisions of Section 73 of Finance Act, 1994, which provides that once the service tax with interest is paid in full, no SCN shall be issued and hence there will be no further proceedings. In this case, I find that the appellant assessee has not disputed the liability and has paid the entire service tax liability along with interest before the issue of SCN. In the case of Marketing & Advertising Services Pvt. Ltd. (2006 (2) TMI 20 - CESTAT BANGALORE), the Bangalore Bench of this Tribunal set aside the interest and penalty imposed under Sections 75 & 76 of the Finance Act, 1994. In the case of Rashtriya Ispat Nigam Ltd. (2002 (11) TMI 234 - CEGAT, BANGALORE) also the Bangalore Bench of this Tribunal held that penalty and interest not imposable and allowed the appeal. - appellant has paid the entire service tax liability along with interest on 05.10.2006, ie., much prior to the issuance of show cause notice on 30.11.2006. Accordingly, I set aside the penalty imposed - Decided in favour of assessee.

Summary

Issues:
1. Liability of service tax on the transport of ready mix concrete through temporary pipes.
2. Imposition of penalty under Section 78 of the Finance Act, 1994.
3. Interpretation of Section 73 of the Finance Act, 1994 regarding issuance of show cause notice.

Analysis:
1. The appellant, a partnership firm, was providing services including transport of goods through road and construction of residential complexes, in addition to pumping ready mix concrete using temporary pipes. A new service related to the transport of goods through pipelines was notified, raising doubts about tax liability. The appellant paid the entire service tax and interest before the show cause notice was issued. The Tribunal clarified that there was no malafide intention for non-payment of tax and held that once the tax with interest is paid in full, no show cause notice shall be issued. Citing precedents, the Tribunal found in favor of the appellant, setting aside the penalty.

2. The Chartered Accountant representing the appellant argued that the Circular indicating tax on permanent pipelines created confusion. Despite this, the appellant proactively paid the tax and interest before the show cause notice. The adjudicating authority imposed a penalty under Section 78 of the Finance Act, 1994. The Commissioner (Appeals) upheld the penalty, emphasizing that the department's detection was crucial. However, the Tribunal, considering the appellant's timely tax payment and lack of dispute on liability, overturned the penalty based on legal provisions and previous case law.

3. The Assistant Commissioner for the Revenue supported upholding the penalty, highlighting the importance of the department's role in uncovering non-compliance. The Tribunal, after hearing both sides, noted the appellant's prompt tax payment and lack of malafide intent. Relying on legal provisions and previous judgments, the Tribunal concluded that the penalty was unwarranted since the tax and interest were paid before the show cause notice. Following precedents, the Tribunal set aside the penalty, aligning with the principle that penalty is not required when tax is paid before the notice is issued.

This detailed analysis of the judgment highlights the issues of tax liability, penalty imposition, and interpretation of relevant legal provisions, ultimately leading to the Tribunal's decision in favor of the appellant based on timely tax payment and absence of malafide intent.