2018 (12) TMI 74 - AT - Service Tax

Penalty u/s 77 and 78 of FA - invocation of Section 73(3) of the Finance Act, 1994 - appellant has paid service tax with interest on beiing pointed out - Held that - Explanation of Section 73(3) is clarificatory in nature, hence can be made applicable both prospective and retrospective - The amendment vide Explanation to Section 73(3) is retrospective in nature as the said amendment has declared that no penalty shall be imposed in cases where the tax has been paid in full along with interest within before the issuance of the show cause notice. In the case of Tamil Nadu Small Inds. Corporation Limited v. Commissioner of Central Excise Chennai - 2008 (2) TMI 367 - MADRAS HIGH COURT , it was held that where an amendment has been introduced to clarify the intention of a notification, the said amendment shall be retrospective in nature. The appellant s case deserves waiver of penalty imposed under Section 77 & 78 of the Finance Act, 1994 in view of Section 73(3) of the Finance Act, 1994 - appeal allowed - decided in favor of penalty.

Summary

Issues Involved:
Waiver of penalty under Section 77 & 78 invoking Section 73(3) of the Finance Act, 1994.

Analysis:

Issue 1: Waiver of Penalty under Section 77 & 78
The appellant, engaged in the business of Authorized Dealer of Maruti Suzuki Four Wheeler, faced a demand for service tax on various issues after a Department audit. The appellant accepted and deposited the service tax along with interest under Section 73(3) of the Finance Act, 1994, before the issuance of the show cause notice. The Adjudicating Authority imposed penalties under Section 77 and 78 despite the payment made. The appellant contended that no proceedings could have been initiated post-payment. The Tribunal referred to the decision in C.Ramachandran vs. Commissioner of Service Tax, Chennai [2016(46) STR 866] and the explanation in Section 73(3) of the Finance Act, 1994. The Tribunal noted that the explanation is clarificatory and can be applied both prospectively and retrospectively, citing the case of Tamil Nadu Small Indus. Corpn. Ltd. v. CCE, Chennai [2009(234) ELT 413 (Mad.)]. The Tribunal emphasized that no penalty shall be imposed in cases where tax and interest are paid before the issuance of the show cause notice, in line with Explanation 2 of Section 73(3). The Tribunal also referenced the case of CCE & ST., LTU Bangalore v. Adecco Flexione Workforce Solutions Ltd. - 2012 (26) S.T.R. 3 (Kar.) to support the retrospective nature of the amendment to Section 73(3).

Conclusion:
The Tribunal allowed the appeal, granting waiver of penalties under Section 77 & 78 of the Finance Act, 1994 based on the provisions of Section 73(3) and the retrospective application of the explanation. The decision was made considering the timely payment of service tax and interest before the show cause notice was issued.