2016 (11) TMI 644 - AT - Service Tax

Demand - Rent-a-Cab - Penalty - Held that - there is no dispute that the Service Tax along with interest was paid by the appellant before issuance of show-cause notice, there is no contest on the said payment - if the assessee pays all the Service Tax along with interest and without any contest the Department is not supposed to issue any show-cause notice - Decided in favor of the assessee.

Summary

Issues:
1. Imposition of penalties under Section 76, 77 & 78 of the Finance Act, 1994.
2. Applicability of Section 73(3) of the Finance Act, 1994.
3. Confirmation of Service Tax liability and imposition of penalties.

Analysis:

1. Imposition of Penalties:
The appellant, engaged in providing "Rent-a-Cab" services, failed to discharge Service Tax from April 2007 onwards on the due date. Despite paying the entire Service Tax dues by April 23, 2008, a show-cause notice was issued proposing a demand of ?2,13,01,211 for the period from April 2007 to March 2008. The learned Commissioner imposed penalties under Sections 76, 77 & 78 of the Finance Act, 1994. However, considering that most of the Service Tax dues were paid before the enquiry, a penalty of ?31,52,030 was imposed under Section 78, with an option for reduced penalty to 25%. The penalties under Sections 76 & 77 were not imposed.

2. Applicability of Section 73(3) of the Finance Act, 1994:
The appellant contended that as per Section 73(3), no adjudication proceedings were necessary since they had paid the entire Service Tax along with interest before the show-cause notice was issued. The appellant argued that no show-cause notice should have been issued as per Section 73(3), and therefore, no penalty should be imposed. The Revenue's appeal was also challenged on the grounds that no adjudication was required in the case.

3. Confirmation of Service Tax Liability and Imposition of Penalties:
The Revenue argued that the order was improper and illegal as the adjudicating authority did not confirm the Service Tax liability and did not impose penalties under Section 76. However, the Tribunal found that since the Service Tax along with interest was paid by the appellant before the show-cause notice was issued, the case fell under the purview of Section 73(3). This section dictates that if the taxpayer pays the Service Tax and interest without contest, the Department should not issue a show-cause notice. Consequently, no adjudication proceedings were required, and no penalties were to be imposed. The Tribunal set aside the penalty imposed under Section 78 and dismissed the Revenue's appeal, affirming the payment of Service Tax along with interest. The appellant's appeal was allowed, and the Revenue's appeal was dismissed.

In conclusion, the Tribunal found that the appellant's case was squarely covered by the provisions of Section 73(3) of the Finance Act, 1994, leading to the setting aside of the penalty under Section 78 and the dismissal of the Revenue's appeal.