2024 (1) TMI 518 - AT - Service Tax

Levy of penalty u/s 78 of FA - Suppression of facts and allegation of fraud, existing or not - HELD THAT - There is no allegation of fraud or suppression, save and accept, that had the audit, not taken notice of the errors in the computation of taxes, the same would have gone unnoticed. Further, we find from the facts on record that the appellant have deposited almost all the taxes with interest before issue of the show cause notice, without any protest. In this view of the matter, there is no condition precedent under Section 78 available and accordingly, the appeal is allowed and the penalties set aside.

Summary

Issues Involved:
The only issue is whether the penalty under Section 78 have been rightly imposed.

Summary:
The case involved a dispute regarding the imposition of penalties under Section 78. The appellant, registered with the Department for providing specific services, had taken Cenvat Credit on imported goods, which was later found to be incorrect during an audit. The appellant had paid the disputed amounts before the show cause notice was issued. The Revenue objected to various discrepancies in the appellant's tax calculations, leading to the issuance of a show cause notice proposing demands and penalties. The Order-in-Original confirmed the demands, imposed penalties under Rule 15(4) of Cenvat Credit Rules and Section 78, which were challenged by the appellant before the Commissioner (Appeals). The Commissioner upheld the order but remanded the matter for fresh calculation of interest. The appellant then appealed to the Tribunal, arguing that the penalties under Section 78 were not justified due to lack of fraudulent intent and timely payment of taxes upon audit notification. The Tribunal, after considering the facts, found no fraud or suppression, noting that the appellant had paid almost all taxes with interest before the show cause notice without protest. Consequently, the Tribunal allowed the appeal and set aside the penalties imposed under Section 78.