2019 (5) TMI 161 - HC - Service Tax

Business Auxiliary Services - non-payment of service tax - HELD THAT - The learned Single Bench was right to an extent that such a plea could not be raised by the assessee at this distance off time especially when the assessee accepted the order in appeal dated 28.07.2016, participated in the de novo proceedings which resulted in order in original dated 22.01.2018. Admittedly, the assessee did not challenge the order in original dated 28.02.2016. It is the Revenue which went on appeal before the First Appellate Authority against the said order - the appeal was not on the merits of the matter but on technical ground that there was a computation error. Even assuming that the First Appellate Authority can rectify the computation error, it cannot be a case where the penalty can also be reduced more particularly when the order in original dated 22.01.2018 was accepted by the assessee and 25% of the penalty was paid within 30 days period thereby giving a protection to the assessee in terms of Clause 2 of second proviso. Therefore, considering the peculiar facts and circumstances of the case, we are of the opinion that the writ petition is untenable. The enhanced penalty cannot be demanded from the appellant/assessee. Though the appellant had filed the writ petition challenging the order in appeal dated 28.09.2018 in its entirety, we restrict the relief only to that of penalty as quantified in the said order to the tune of ₹ 4,77,542/- and the said penalty stands deleted. In all other aspects, the order in appeal dated 28.09.2018 stands confirmed. Appeal allowed.

Summary

Issues:
Challenge to order in appeal by Commissioner (Appeals II) dated 28.09.2018 in relation to service tax payment for the financial year 2007-08.

Analysis:
The appellant contested a show cause notice alleging non-payment of service tax in 2007-08 despite a turnover of ?52,00,000. The appellant argued they believed service tax was due only post-registration and had been paying since March 2008. The Original Authority confirmed the tax demand, interest, and penalties. The Appellate Authority partially set aside the order, remanding for fresh computation. The Adjudicating Authority later determined a reduced tax liability of ?1,58,803, which the appellant paid. The Revenue appealed this decision, not on merits but on a technical calculation error. The Appellate Authority upheld the tax demand and penalty. The appellant filed a writ petition, challenging the defective show cause notice and penalty imposition.

The High Court noted the appellant's acceptance of the Adjudicating Authority's order and payment of the determined tax and penalty. The Court found the plea challenging the show cause notice belated, given the appellant's participation in subsequent proceedings. The Court emphasized that the appellant's failure to challenge the original order and acceptance of the subsequent decisions precluded raising new objections. The Court deemed the writ petition untenable, emphasizing the appellant's compliance with the penalty payment within the prescribed time limit under Section 78.

The Court concluded that the penalty demand was unwarranted, and while the appellant sought relief on various grounds, the Court restricted relief solely to the penalty amount of ?4,77,542. The Court upheld the remaining aspects of the order in appeal. The writ appeal was allowed only to the extent of penalty deletion, with no costs awarded. The connected miscellaneous petition was closed accordingly.