2018 (9) TMI 1367 - AT - Service Tax

Penalty u/s 77 and 78 of FA - service tax with interest paid before issuance of SCN - invocation of sub-section (3) of Section 73 of the Act for non-issuance of SCN with respect to penalties - Held that - The authorities below have not specifically made the issue regarding involvement of the appellant in the activities of fraud, suppression etc, with intention to defraud the Government revenue - the benefit of Section (3) of Section 73 of the Act should be extendable to the appellant for closure of subsequent proceedings, upon payment of service tax along with interest. Since the department initiated show cause proceedings only for appropriating the amount already paid by the appellant and for imposition of penalties, such action on the part of the authorities below cannot be sustained for judicial scrutiny. Penalties set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Appeal against order passed by Commissioner (Appeals), Central Excise, Nagpur regarding service tax payment by a State Cricket Association.
- Applicability of Section 73(3) of the Act for non-issuance of show-cause notice and imposition of penalties.
- Interpretation of Section 78 for penalties on non-payment of service tax on renting of immovable property.
- Comparison with previous Tribunal decisions on similar cases.
- Validity of penalties imposed under Section 77 and 78 of the Finance Act, 1994.

Analysis:
1. The appeal was filed against the order passed by the Commissioner (Appeals), Central Excise, Nagpur, related to the non-payment of service tax by a State Cricket Association for restaurant services and renting of immovable property. The appellant promptly paid the service tax along with interest upon detection of the irregularities by the audit wing of the Department before the issuance of a show-cause notice.

2. The appellant argued that they should be entitled to the benefit of Section 73(3) of the Act for non-issuance of show-cause notice and imposition of penalties, as there was no intention of fraud or suppression of facts. The appellant relied on previous Tribunal decisions to support their case, emphasizing that penalties should not be imposed in the absence of specific evidence of fraudulent activities.

3. The Revenue contended that the appellant, being under self-assessment, was liable for penalties for not paying the service tax within the prescribed timeframe. However, the Tribunal observed that the department did not establish any fraudulent intent or suppression by the appellant, leading to the conclusion that penalties under Section 77 and 78 were not justified.

4. Upon reviewing the case records, the Tribunal found that the appellant had rectified the non-payment of service tax upon detection and before the show-cause notice was issued. The Tribunal also noted that previous decisions by the Tribunal had set aside penalties imposed under Section 78 in similar cases, emphasizing the importance of evidence of fraudulent activities for penalty imposition.

5. Ultimately, the Tribunal ruled in favor of the appellant, setting aside the penalties imposed under Section 77 and 78 of the Act. The decision was based on the lack of evidence supporting the imposition of penalties and the appellant's prompt payment of the service tax along with interest upon detection of the irregularities, in line with the provisions of Section 73(3) of the Act.