2018 (5) TMI 318 - AT - Service Tax

Validity of SCN - Section 73(3) of the Act - Benefit of N/N. 1/2006-ST dated 1.3.2006 denied on the ground that the value of free supplied material was not included in gross amount charged to customer - Held that - the payment of service tax along with interest attained finality and the same has been concluded in such case. Neither assessee can raise issue on merits nor the department could have issued any show cause notice - the entire case has been concluded with the payment of service tax along with interest, therefore the show cause notice itself is not maintainable - appeal disposed off.

Summary

Issues:
1. Whether the service tax demand denying exemption on the ground of free supplied material not included in the gross amount charged is correct.
2. Whether the appellant is liable for penalty under Section 78 when service tax was paid before the show cause notice.

Analysis:
1. The main issue in this case was whether the service tax demand denying exemption based on the non-inclusion of the value of free supplied material in the gross amount charged to the customer was valid. The appellant argued that the payment of entire service tax along with interest before the show cause notice was issued should preclude the imposition of penalty under Section 78. The appellant also referenced a previous case, Bhayana Builders (P) Ltd. Vs. CST, where a similar issue was decided in favor of the assessee. The Tribunal found that the value of free supplied material need not be included for eligibility of the exemption Notification No. 1/2006-ST. Since the appellant had paid the service tax and interest before any show cause notice, the Tribunal concluded that the case had been concluded, and no penalty should be imposed.

2. The second issue revolved around the imposition of penalty under Section 78 despite the appellant having paid the entire service tax along with interest before the issuance of the show cause notice. The Assistant Commissioner for the Revenue reiterated the findings of the impugned order. The Tribunal, after considering the arguments from both sides, held that since the payment of service tax and interest had attained finality before any show cause notice was issued, the case had been concluded. Therefore, the show cause notice itself was deemed not maintainable. Consequently, the Tribunal set aside the penalty imposed under Section 78 by invoking Section 73(3) of the Finance Act, 1994. The appeals were disposed of in favor of the appellant based on the above analysis.

The judgment was pronounced in court on 17/04/2018 by Mr. Ramesh Nair, Member (Judicial), and Mr. C.J. Mathew, Member (Technical).