2016 (11) TMI 243 - AT - Service Tax

Imposition of penalties - Section 73(3) of the Finance Act, 1994 - Held that - the tax liability and the interest have been discharged before the issuance of the show-cause notice and on being pointed out by the authorities. Provisions of Section 73(3) of the Finance Act, 1994 categorically provided that if the service tax liability and the interest thereof is paid on their own or on pointed out by the lower authorities, there is no need to issue the show-cause notice. This view was upheld by the Hon ble High Court of Karnataka in the case of CCE, Bangalore v. Adecco Flexione Workforce Solutions Ltd. 2011 (9) TMI 114 - KARNATAKA HIGH COURT In view of the foregoing, invoking provisions of Section 80 of the Finance Act, 1994, I set aside the penalties imposed on the appellant while upholding the service tax liability and interest thereof - appeal disposed off - decided partly in favor of appellant.

Summary

Issues:
- Whether the penalty imposed for non-discharge of service tax liability is correct.

Analysis:
The appeal was directed against an Order-in-Appeal dated 31.10.2012. In the absence of representation from the appellant, the appeal was taken up for disposal. The main issue for consideration was the correctness of the penalty imposed by the lower authorities on the appellant for non-discharge of service tax liability. The Revenue claimed a tax amount of ?8,20,627/- along with interest due to the appellant's alleged failure to discharge service tax liability on received commissions. However, the appellant contended that they had already discharged the tax liability and interest before the issuance of the show-cause notice, citing Section 73(3) of the Finance Act, 1994. This section states that if the tax liability and interest are paid before the issuance of the show-cause notice, penalties should not be imposed.

Upon reviewing the records, it was found that the tax liability and interest had indeed been paid before the show-cause notice was issued and brought to the attention of the authorities. Section 73(3) of the Finance Act, 1994 explicitly states that in such cases, where the tax liability and interest are paid on their own or upon being pointed out by the authorities, there is no requirement for a show-cause notice. This interpretation was supported by a judgment of the Hon'ble High Court of Karnataka in the case of CCE, Bangalore v. Adecco Flexione Workforce Solutions Ltd. (2012). Consequently, invoking Section 80 of the Finance Act, 1994, the penalties imposed on the appellant were set aside, while the service tax liability and interest were upheld. The judgment favored the appellant based on the timely discharge of their tax obligations, as per the provisions of the Finance Act, 1994.