2017 (11) TMI 660 - AT - Service Tax

Closure of proceedings - invocation of Section 73(4A) of FA - duty paid alongwith interest and penalty - Held that - the appellant has paid the service tax along with interest and also paid 1% penalty and requested the department for closure of the proceedings but the department did not close the proceedings and proceeded to issue the show-cause notice and by passing the impugned order imposed various penalties. Further, I also find that the Commissioner has allowed the closure of the proceedings only for the period 8.4.2011 t 31.3.2012 by holding that the said proviso is only prospective and also held that no penalties are imposable for this period. Tribunal in the case of SS Service providers 2016 (9) TMI 486 - CESTAT CHANDIGARH has held that provisions of Section 73(4A) will be applicable even for the period prior to the issuance of Show-cause notice. If the ratio of the above decision is followed, then the department should have closed the proceedings as the appellant has paid the duty, interest and 1% penalty. Once the appellant pays duty along with interest, no show-cause notice should have been issued. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Imposition of various penalties under the Finance Act, 1994
- Liability of the appellant to pay service tax
- Appropriation of penalties paid by the appellant
- Closure of proceedings under Section 73(4A) or Section 73(3) of the Finance Act, 1994
- Sustainability of penalties imposed under Section 78 of the Finance Act

Analysis:

The appellant, a civil contractor, undertook construction contracts for various builders and individuals. Believing that the main contractors were discharging service tax, the appellant did not register for service tax, charge or collect it, or file service tax returns. Following investigations by the Central Excise Department, the appellant registered for service tax, calculated the payable amount, and made payments in installments. The Commissioner, in the impugned order, confirmed the service tax payment but imposed penalties under various sections of the Finance Act, 1994, leading to the present appeal.

The appellant contended that the order was contrary to the law and judicial precedents, emphasizing that the entire service tax, interest, and 1% penalty under Section 73(4A) were paid. The appellant argued that the proceedings should have been closed upon full payment. The Commissioner allowed closure for a specific period only, leading to the appeal. Citing precedents, the appellant argued that penalties should not have been imposed, and the proceedings should have been closed earlier.

The appellant further challenged the penalties imposed under Section 78, arguing that the amount was excessive and lacked substantiation of fraud or suppression. The appellant highlighted statutory provisions limiting penalties to 25% of the service tax amount paid within a specified period. The AR defended the penalties, citing lack of cooperation and delayed information provision by the appellant.

After evaluating the submissions and the impugned order, the Tribunal found that the appellant had paid the service tax, interest, and penalty, seeking closure of proceedings. The Tribunal noted that the Commissioner allowed closure for a limited period and imposed penalties despite precedents suggesting otherwise. Relying on legal interpretations, the Tribunal concluded that the impugned order was unsustainable, setting it aside and allowing the appeal with consequential relief.

In conclusion, the Tribunal's decision favored the appellant, emphasizing compliance with payment obligations and precedents regarding closure of proceedings and penalty imposition under the Finance Act, 1994.

(Order was pronounced in open court on 09.11.2017)