2018 (11) TMI 177 - AT - Service Tax

Penalty u/s 77 and 78 of FA - service tax on GTA Service paid alongwith interest - Held that - The levy of service tax on GTA was notified from 1.1.2005 and there was a doubt whether an individual truck owners are liable to pay the service tax or not. But in the present case, the appellants paid the service tax along with interest before the issuance of show-cause notice and the same have been appropriated in the impugned order by the Original Authority. Once the service tax and the interest has been paid prior to the issuance of show-cause notice, the department should not have issued the show-cause notice and the proceedings are deemed to be concluded under Section 73(3) of the Finance Act - penalty set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
Three appeals filed against a common impugned order upholding the Order-in-Original regarding service tax liability on Goods Transport Agency (GTA) service.

Analysis:
The appeals involved the issue of the liability of three appellants engaged in transporting goods under the category of GTA service for the period from 1.1.2005 to 31.3.2006. The appellants had not registered with the department or paid the service tax initially. Upon investigation, they registered and paid the service tax with interest but not the penalty, leading to the issuance of show-cause notices. The Joint Commissioner confirmed the demand of service tax, interest, and penalties under relevant sections of the Finance Act, 1994. The appeals were filed before the Commissioner (A) challenging the order, which was rejected.

The appellant's counsel argued that the impugned order was unsustainable as it contradicted binding judicial precedents. He contended that the levy of service tax under GTA service was in doubt, especially regarding individual truck owners' liability. Despite paying the service tax and interest before the show-cause notice, the department proceeded with penalties. The counsel cited various decisions to support the argument.

Upon hearing both parties and examining the records, the Judicial Member noted that the service tax levy on GTA was effective from 1.1.2005, with uncertainties about individual truck owners' tax liability. However, since the appellants paid the tax and interest before the notice, and there was no intent to evade payment, the penalties were deemed unsustainable. Citing the decisions relied upon by the appellant, the Judicial Member concluded that the proceedings should have been deemed concluded under Section 73(3) of the Finance Act once the tax and interest were paid. Consequently, the penalties under Section 77 and 78 were set aside, and all appeals were allowed in favor of the appellants.

In conclusion, the judgment resolved the issue of penalty imposition on the appellants for non-payment of service tax under GTA service, emphasizing the importance of prior tax payment and lack of intent to evade payment in determining penalty liability under the Finance Act, 1994.