2019 (1) TMI 1175 - AT - Service Tax

Penalty - short payment of service tax - entire deficiency was made good alongwith the interest much prior the issuance of the show cause notice - applicability of sub-section (3) of Section 73 of the Finance Act - interpretation of statute - Held that - The bare perusal makes it clear that the word used in Section 73 (3) of the Finance Act is shall . Thus, the legislature has mandated that where the duty, which has either not been paid or has been short paid, if stands paid, the Department mandatorily has not to serve any show cause notice upon such an assessee. The fact of the present case that the entire duty as has been proposed to be recovered from the impugned show cause notice stands deposited vide challan No. 00055 dated 18.03.2003. The interest has also been deposited vide challan No. 00003 dated 19.03.2003. The fact has very much been acknowledged in the show cause notice itself. the entire payment alongwith interest was made much prior the show cause notice dated 05.01.2017. There is no reason to deny the benefit of sub section (3) of Section 73 of the Act to the appellant. The intimation was also very much to the Department vide the letter on record dated 17.10.2015. Since the facts were to the notice of the Department, the Department was liable to issue show cause notice, during the normal period of one year. The Department is therefore opine to have wrongly invoked the extended period. Section 73 to sub-section (3) is held to be applicable to the given facts and circumstances - no penalty imposable - appeal allowed - decided in favor of appellant.

Summary

Issues:
Recovery of Service Tax Liability for the period April 2014 to December 2014, Applicability of Section 73(3) of the Finance Act, Imposition of Penalty

Analysis:
The case involved the recovery of Service Tax Liability for a specific period where the appellant failed to discharge the full tax liability and file ST-3 Returns. The Department proposed the recovery of the short payment along with interest and penalties, leading to a show cause notice and subsequent orders by the authorities. The appellant argued financial constraints and delayed invoices as reasons for the non-payment in 2014. The appellant contended the applicability of Section 73(3) of the Finance Act to waive penalties due to the timely payment made before the notice. The Department, however, argued for the applicability of Section 73(4) due to alleged suppression of facts.

The Tribunal analyzed the provisions of Section 73 of the Finance Act, focusing on subsections (3) and (4). Section 73(3) mandates that if the service tax is paid before the notice is served, no penalty shall be imposed. The Tribunal noted that the entire duty proposed for recovery was deposited before the show cause notice, as acknowledged by the Department. The appellant had intimated the payment to the Department prior to the notice, making the imposition of penalty unjustifiable.

The Tribunal further emphasized that the Department had acknowledged the payments made by the appellant, which were well-documented and dated before the issuance of the show cause notice. It was held that the Department wrongly invoked the extended period for issuing the notice, and the plea of suppression of facts was deemed unsustainable. Consequently, the Tribunal ruled that the show cause notice was time-barred, and Section 73(3) was applicable to the case, absolving the appellant from any penalty. The order imposing the penalty was set aside, and the appeal was allowed in favor of the appellant.