2024 (2) TMI 82 - AT - Service Tax

Levy of penalty u/s 78 of FA - suppression of facts - requirement to issue SCN when the amount of service tax along with interest is paid up - HELD THAT - On perusal of show cause notice it is seen that notice has been issued pursuant to audit verification. It is also mentioned in the show cause notice that appellant discharged the service tax along with interest in November 2012. As per sub-section (3) of Section 73 of Finance Act, 1994 no show cause notice shall be issued when the amount of service tax along with interest is paid up as ascertained by the officer or assessee. In the present case, after payment of service tax and interest by the appellant the show cause notice has been issued alleging suppression of facts. On perusal of records, it is found that appellant has reflected all the transactions in their accounts, balance sheets and other financial documents. So also the show cause notice is based only upon the audit verification. For the subsequent period, the Hon ble Gujarat High Court in COMMISSIONER, CENTRAL GST AND CENTRAL EXCISE VERSUS TIRUPATI SARJAN LIMITED 2018 (11) TMI 423 - GUJARAT HIGH COURT has upheld the decision of the Tribunal wherein the penalty was set-aside observing that there is no suppression of facts. It is found that no evidence adduced by the department to substantiate the allegation of suppression of facts with intention to evade payment of service tax on the part of the appellant for the disputed period. The impugned order is modified by setting aside the penalties imposed without disturbing the confirmation and appropriation of service tax and interest - Appeal allowed.

Summary

Issues involved:
The issues involved in the judgment are non-payment of service tax under Construction Services falling under Section 65(105)(zzq), imposition of penalty under Section 78, and alleged suppression of facts with intent to evade payment of service tax.

Non-payment of service tax:
The appellant, engaged in providing construction services, was found to have not discharged service tax under Construction Services falling under Section 65(105)(zzq) during the audit period from October 2007 to September 2012. Although the appellant paid the service tax belatedly along with interest in November 2012, no penalty was paid. A show cause notice was issued invoking the extended period, proposing to recover the service tax, interest, and impose a penalty. The original authority confirmed the demand of service tax, ordered appropriation of the amount already paid, and imposed a penalty under Section 78. The appellant contested the penalty before the Tribunal.

Imposition of penalty:
The appellant argued that they had paid all outstanding dues of service tax along with interest in 2012 itself, as per the show cause notice. The appellant maintained that there was no evidence of suppression of facts in the financial statements or balance sheet, as alleged by the department. The appellant's consultant referred to a decision of the Hon'ble Gujarat High Court in a similar case where the penalty under Section 78 was set aside, emphasizing that there was no suppression of facts. The appellant requested for the penalty to be set aside.

Alleged suppression of facts:
Upon hearing both parties, the Tribunal observed that the appellant did not contest the service tax or interest paid. The show cause notice was issued post-audit verification, and it was noted that the appellant had discharged the service tax along with interest before the notice was issued. As per Section 73(3) of the Finance Act, 1994, no show cause notice should be issued if the service tax and interest are already paid. The Tribunal found that the appellant had properly reflected all transactions in their accounts and financial documents. Referring to a previous decision of the Hon'ble Gujarat High Court, the Tribunal concluded that there was no evidence to substantiate the allegation of suppression of facts by the appellant. Therefore, the penalties imposed were set aside, while confirming the service tax and interest payment. The appeal was allowed accordingly.