2017 (4) TMI 751 - AT - Service Tax

Penalty - whether penalty u/s 76 of the FA, 1994 is required to be imposed upon the appellant when Service Tax involved, along with interest, was paid by the appellant before the issue of SCN? - Held that - Once full disclosure of tax liability has been made in the ST-3 Returns then it cannot be said that appellant had any motive to evade payment of Service Tax. At the same time a penalty provided u/s 76 of the FA, 1994 cannot be interpreted to mean that in each and every case of delayed payment penalty is required to be imposed when entire tax liability required to be paid has been fully disclosed in the ST-3 Return - penalty set aside - appeal allowed - decided in favor of appellant-assessee.

Summary

Issues involved: Whether penalty imposed by the adjudicating authority was correctly upheld by the first appellate authority.

Analysis:

The appellant filed an appeal against the Order-in-Appeal passed by the Commissioner (Appeals) regarding the penalty imposed. The main issue was whether the penalty of ?3,40,832/- imposed by the adjudicating authority was correctly upheld. In the absence of the appellant during the hearing, the Revenue argued that the appellant filed ST-3 Returns but did not pay the entire Service Tax by the due date. The Revenue contended that the penalty was justified as the appellant did not provide any reason for the delay in payment. The Revenue highlighted that the appellant eventually paid the entire amount along with interest without a separate show cause notice demanding the payment.

Upon hearing the arguments, the Tribunal considered whether the penalty under Section 76 of the Finance Act, 1994 should be imposed on the appellant for delayed payment of Service Tax. The Tribunal noted that the appellant had filed the ST-3 Returns with the Service Tax assessed but had not paid the tax on time, subsequently paying with interest as per Section 75 of the Finance Act. The Tribunal observed that once the full tax liability was disclosed in the returns, it could not be assumed that the appellant intended to evade payment. The Tribunal also clarified that the penalty provision under Section 76 should not be interpreted to mandate penalty imposition in every case of delayed payment when the tax liability was fully disclosed. Consequently, the Tribunal held that this was not a suitable case for imposing a penalty on the appellant and allowed the appeal by setting aside the Order-in-Appeal passed by the first appellate authority.