2019 (6) TMI 626 - HC - Central Excise

Imposition of penalty - service tax with interest paid on being pointed out before issuance of SCN - suppression of facts with intent to evade - INVOCATION OF section 73(3) of Finance Act - HELD THAT - Appellant had not paid the service tax as the outward transportation under the category of GTA for the period from April, 2009 to December, 2011, this even though they had admittedly incurred expenses for the same. It is only during the course of EA 2000 audit that above non payment of service tax on the part of the Appellant was discovered by the revenue. This discovery on the part of the Revenue led the Appellant to deposit the service tax as well as interest thereon even before the show cause notice was issued by the revenue - In the circumstances, even if the tax and the interest on the same was paid before the issue of notice, it is not open to the Appellant to take benefit of section 73 (3) of the Act as the non payment of the service tax was on account of suppression with a malafide intention to evade payment of service tax. Thus in view of section 73(4) of the Act, the benefit of section 73 (3) of the Act, claimed by the Appellant would not be available. The contention that there was a bonafide belief that the Appellant are not liable to pay the service tax on outward transportation of goods and the GTA is not supported by any reasonable explanation. The bonafide belief that one is not liable to pay the tax has to be based on some facts on record which led to the belief - Thus, it is not possible to accept the contention that the Appellant had bonafide belief of for non payment of tax, so as to invoke section 80 of the Act. Appeal dismissed - decided against appellant.

Summary

Issues:
1. Applicability of Section 80 of the Finance Act, 1994
2. Imposition of penalty under Section 77 and Section 78 of the Finance Act, 1994
3. Interpretation of Sections 73(3) and 73(4) of the Finance Act, 1994

Analysis:

Issue 1: Applicability of Section 80 of the Finance Act, 1994
The Appellant contended that they had recorded transactions in their books of accounts and paid service tax before the issuance of a notice under section 73(1) of the Finance Act, 1994. They argued that they should be entitled to the benefits of Section 80 of the Act. However, the Tribunal found that the Appellant had not paid service tax on outward transportation despite incurring expenses, and thus, the extended period of limitation was invoked. The Tribunal held that the Appellant failed to establish a bonafide belief for non-payment of service tax, and therefore, Section 80 could not be invoked. The Court upheld the Tribunal's decision, stating that the Appellant's belief lacked reasonable explanation and did not justify the invocation of Section 80.

Issue 2: Imposition of penalty under Section 77 and Section 78 of the Finance Act, 1994
The Additional Commissioner confirmed a show cause notice against the Appellant for evasion of service tax payment, leading to the imposition of penalties under Section 77 of the Act. The Appellant appealed to the Commissioner, who upheld the decision. The Tribunal further dismissed the Appellant's appeal, citing that the Appellant had not paid service tax on outward transportation despite incurring expenses, and failed to demonstrate a bonafide belief for non-payment. The Tribunal concluded that no reasonable cause was shown for the non-payment of service tax, thereby justifying the imposition of penalties under Section 77 and Section 78. The Court upheld the Tribunal's decision, emphasizing the lack of bonafide belief and reasonable cause for non-payment.

Issue 3: Interpretation of Sections 73(3) and 73(4) of the Finance Act, 1994
The Appellant argued that Section 73(3) of the Act prevented the issuance of a notice under Section 73(1) since they had paid service tax before the notice was issued. However, the Court found that the non-payment of service tax was due to suppression with a malafide intention to evade payment, disqualifying the Appellant from claiming the benefit of Section 73(3). The Court noted that a bonafide belief must be supported by reasonable explanation, which the Appellant failed to provide. The Court agreed with the Tribunal's decision that the Appellant's belief of non-liability to pay tax lacked a factual basis and could not invoke Section 73(3) or Section 80. Consequently, the Court dismissed the appeal, upholding the Tribunal's decision on the interpretation of Sections 73(3) and 73(4) of the Finance Act, 1994.