2017 (8) TMI 517 - AT - Service Tax

Short payment of Service Tax - payment of tax with interest before issuance of SCN - invocation of Section 73(3) and 73(4) - Held that - Section 73(3) can be invoked only in a case where there is no suppression of fact on the part of the appellants. Otherwise in terms of sub-section (4) immunity under Section 73(3) is not available - the appellants knowingly that there is a short payment of service tax did not discharge the same. Therefore this is a clear case of suppression of fact on the part of the appellants. Accordingly, in terms of sub-section (4) of section 73, the immunity under 73(3) cannot be extended to the appellants - appeal dismissed - decided against appellant.

Summary

Issues:
Short payment of service tax, imposition of penalty under Section 78(1), invocation of Section 73(3) for immunity, suppression of fact by the appellants.

Short Payment of Service Tax:
The appellant, engaged in providing telecommunication services, faced a short payment of service tax for the period 2009-10 and 2010-11, which was identified during an audit in December 2011. The audit report was issued in 2014, followed by a show-cause notice in 2015 proposing a demand for the short-paid service tax, interest, and penalty under Section 78. The adjudication confirmed a demand of service tax and interest, with a penalty imposed under Section 78(1) of the Finance Act, 1994. The appellant contested the penalty before the Commissioner (Appeals) solely based on Section 73(3) immunity, as they had paid the service tax with interest before the notice was issued.

Imposition of Penalty under Section 78(1):
The appellant argued that the short payment was due to improper reconciliation, not intentional evasion, as they regularly paid substantial service tax amounts. They contended that paying the service tax before the notice should grant them immunity under Section 73(3). The appellant cited legal precedents to support their claim, emphasizing no intent to evade payment. However, the Revenue maintained the findings of the original order.

Invocation of Section 73(3) for Immunity:
The appellant sought immunity under Section 73(3) by asserting that they paid the service tax with interest before the show-cause notice, thereby fulfilling the conditions for immunity. They argued that the mismatch between bill amounts and receipts led to the short payment, with no fraudulent intent. The Tribunal analyzed the provisions of Section 73(3) and (4) to determine the applicability of immunity, emphasizing that suppression of fact would disqualify the appellant from such protection.

Suppression of Fact by the Appellants:
The Tribunal concluded that the appellants knowingly failed to discharge the short payment of service tax, despite finalizing their balance sheets before the audit revealed the discrepancy. This deliberate non-compliance constituted a suppression of fact, rendering the immunity under Section 73(3) unavailable. The Tribunal differentiated the facts of the present case from the legal precedents cited by the appellant, ultimately upholding the original order and dismissing the appeal.

This comprehensive analysis of the judgment highlights the key issues surrounding the short payment of service tax, imposition of penalty under Section 78(1), the invocation of Section 73(3) for immunity, and the Tribunal's assessment of suppression of fact by the appellants.