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2018 (11) TMI 1527 - AT - Service TaxPenalty - the Appellants have made up the Service Tax liability with interest totally before the issuance of show cause notice - no intent to evade - Held that - It is clear that there was no intention to evade the Service Tax liability - Since the Appellant has discharged the Service Tax liability before the issuance of the show cause notice therefore it is clear that there was no malafide intention. There was bonafide belief which might have made the Appellant not to discharge the tax liability on time - there is a reasonable cause for non-payment of service tax by the Appellant and accordingly, the provision of Section 80 of the Finance Act, 1994 can be applied for waiver of penalty u/s 78 ibid of the Finance Act, 1994. Appeal allowed - decided in favor of appellant.
Issues:
Whether the Appellant is liable to pay the penalty under Section 78 of the Finance Act, 1994. Analysis: The Appellant, a partnership firm engaged in construction services, believed they were not liable for service tax. They only realized their liability when informed by the department and promptly paid the entire service tax, interest, and late fees for the period in question before receiving a show cause notice. The Appellant's Chartered Accountant had assured them of no service tax liability, and they did not collect service tax from customers. The Appellant contended that despite these facts, the Revenue imposed a penalty under Section 78. The Tribunal found that the Appellant's actions showed no intention to evade tax, and the delay was due to a genuine belief. The Tribunal applied Section 80 of the Finance Act, 1994, for waiver of the penalty under Section 78, citing reasonable cause for non-payment. In a similar case, the Tribunal ruled in favor of the appellant, setting aside the penalty under Section 78. The Tribunal emphasized that the appellant promptly paid the service tax upon department notification, showing no intent to evade payment. The Tribunal invoked Section 73(3) of the Finance Act, 1994, stating that when an assessee pays service tax with interest, no show cause notice should be issued, hence no penalty is warranted. The Tribunal considered the litigation uncertainty and the appellant's immediate tax payment as reasonable causes for non-payment on time, leading to penalty waiver under Sections 77 and 78. Similarly, in another case, the Tribunal allowed the appeal of the appellant, a small-time contractor who paid service tax along with interest upon notification. The absence of evidence indicating fraud or suppression to evade duty led the Tribunal to apply relevant case laws and allow the appeal against penalty imposition. The Tribunal highlighted that the appellant did not collect service tax separately from clients, and the penalties were not justified. Therefore, considering the circumstances and precedents, the Tribunal allowed the appeal of the Appellant, emphasizing prompt tax payment upon notification and the absence of fraudulent intent or suppression to evade duty.
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