2018 (11) TMI 1225 - AT - Service Tax

Validity of SCN - Penalty u/s 77 (1)(a), Section 77 (2) and Section 78 of FA - Held that - The transaction was duly recorded in the books of accounts maintained in the ordinary course of business. Further admitted fact is that appellant had paid the service tax along with interest under intimation to revenue, prior to issuance of show cause notice - the issue of show cause notice for the demand of ₹ 3,52,260/- along with interest & proposed penalty, is bad under the provisions of section 73(3) read with proviso and explanation. The provisions of section 73 are not attracted under the facts and circumstances of this case. The appeal is allowed and the impugned order is set aside so far it has confirmed the demand and the penalty - appeal allowed - decided in favor of appellant.

Summary

Issues:
Validity of show cause notice issuance and imposition of penalties under Sections 77(1)(a), 77(2), and 78.

Analysis:
The appeal before the Appellate Tribunal CESTAT NEW DELHI revolved around the validity of the show cause notice issuance and the imposition of penalties under Sections 77(1)(a), 77(2), and 78. The appellant, a Public Sector Company, was under scrutiny for allegedly not paying service tax on rental income received from IRCTC. The appellant argued that they had paid the tax and interest before the show cause notice was issued, and there was no fraudulent intent involved as the transactions were duly recorded in their books. The Revenue, however, relied on a previous ruling to justify the penalty imposition based on different circumstances.

The Tribunal, after considering the arguments, found that the facts of the present case did not align with the circumstances of the previous ruling cited by the Revenue. It was noted that the transactions were properly recorded in the appellant's accounts, and the service tax along with interest had been paid before the show cause notice was issued. Consequently, the Tribunal held that the show cause notice for the demand of a specific amount, along with interest and proposed penalties, was invalid under the relevant provisions. The Tribunal further concluded that the provisions of section 73 were not applicable in this case. As a result, the appeal was allowed, the impugned order was set aside concerning the demand and penalties, and all imposed penalties were revoked. The appellant was granted consequential benefits as per the law.

In conclusion, the judgment focused on the procedural validity of the show cause notice issuance and the imposition of penalties under specific sections. The Tribunal emphasized the importance of proper documentation and compliance with tax obligations, ultimately ruling in favor of the appellant due to the timely payment of taxes and lack of fraudulent intent in the recorded transactions.