2016 (3) TMI 672 - AT - Service Tax

Imposition of penalties u/s.77 (1a), 77(2) and 78 of the Finance Act, 1994 - Appellant working as interior decorator not registered with the Service tax department and also not collecting any service tax on the invoices raised by him to his clients. After enquiry initiated, realised his liability and deposited tax with interest and 25% penalty before issue of show cause notice and after availing Cum tax benefit - Held that - when the assesse is not disputing his liability for discharging the statutory obligations and has paid the entire tax alongwith the interest and 25% of the penalty and there after discharging his obligations as a tax payer, in view of the provisions of Section 73(4A) the proceeding should be deemed to have been concluded. By following the decision of Hon ble Supreme Court in the case of Commissioner vs Advantage Media Consultant 2008 (10) TMI 570 - SUPREME COURT , the penalties under Section 77(1)(a) and 77(2) are set aside and penalty imposed under Section 78 is restricted to 25% of duty demanded. Decided in favour of appellant

Summary

Issues:
Demand of service tax, interest, and penalties under various sections of the Finance Act, 1994; Appeal against Order-in-Original; Applicability of Section 73(4A) in the case; Appropriation of payments made by the appellant; Imposition of penalties under different sections.

Analysis:

1. The appellant, a service provider in interior decoration, received a Show Cause Notice demanding service tax, interest, and penalties under different sections of the Finance Act, 1994. The adjudicating authority confirmed a demand of Rs. 1,76,177/- and imposed penalties under various sections, which the appellant contested through an appeal before the Ld. Commissioner (Appeals) and subsequently before the Tribunal.

2. The appellant, through their counsel, argued that they promptly registered with the Service Tax Department and paid the demanded amounts before the issuance of the show cause notice, availing the Cum Tax benefit. They cited Section 73 of the Finance Act, 1994, emphasizing sub-section (4A) and referred to a Tribunal decision supporting their case.

3. The revenue, represented by the Ld. AR, contended that the appellant registered only during investigations and should not benefit from Cum Tax treatment. They highlighted the importance of not levying service tax on an amount less than the gross value of services and argued against the relevance of a previous Tribunal decision cited by the appellant.

4. Upon hearing both sides, the Tribunal noted that the appellant, initially unregistered and not collecting service tax, later registered, paid the demanded amounts, and did not dispute their liability. The Tribunal referenced Section 73(4A) for cases where tax has not been levied or paid but true transaction details are available, allowing for payment with interest and penalty before notice service.

5. Referring to legal precedents, including a Supreme Court ruling, the Tribunal emphasized that the appellant fulfilled their obligations as a taxpayer by paying the due amounts and should benefit from the provisions of Section 73(4A). The Tribunal also addressed the oversight in appropriating the full payment made by the appellant, directing the adjudicating authority to rectify the error.

6. Following the legal principles established in previous cases, the Tribunal set aside penalties imposed under specific sections, restricted penalty under section 78 to 25% of the duty demand, and directed the proper appropriation of all payments made by the appellant. The Tribunal allowed the appeal on these terms, ensuring compliance with the Finance Act, 1994, and relevant legal provisions.

This detailed analysis covers the issues raised in the judgment, providing a comprehensive overview of the arguments presented by both parties and the Tribunal's decision based on legal principles and precedents.