2010 (9) TMI 86 - AT - Service Tax

Penalty - The assessee delayed in payment of service tax and paid interest on it. But interest paid was short of Rs.2,221/-. Thereafter, the show cause notice was issued to the appellant, proposing to demand service tax and interest and also imposition of penalty. The assessee submitted that the appellants had paid full amount of service tax before issue of show cause notice and therefore, the show cause notice should not have been issued and no penalty under Section 76 was imposable. The tribunal decided against the assessee on the basis of facts of the case.

Summary

Issues:
Delay in payment of service tax, imposition of penalty under Section 76, applicability of Section 73(3) of Finance Act, 1994, calculation of penalty amount.

Analysis:
The case involved a situation where the appellants, engaged in construction services, faced a delay in paying service tax for the period from October 2006 to March 2007. Despite paying the service tax with interest on subsequent dates, there was a shortfall of Rs.2,221 in interest payment. A show cause notice was issued, proposing to demand service tax, interest, and penalty. The lower authorities held that penalty under Section 76 was applicable due to the delay in payment.

The appellant argued that they had paid the full service tax amount before the show cause notice was issued, invoking the provisions of Section 73(3) of the Finance Act, 1994, which states that no show cause notice can be issued if the service tax is paid before the notice. However, the respondent contended that the payment of Rs.4,141, including interest and service tax, was made only after the issuance of the show cause notice, thus disqualifying the appellant from the benefits of Section 73(3).

The presiding member, considering both arguments, highlighted that Section 73(3) clearly stipulates that the service tax along with interest must be paid before the show cause notice to avoid penalty under Section 76. The member noted that even though the amount due was small, the failure to pay before the notice was issued warranted penalty. The appellant's financial difficulties were acknowledged, but the collection of service tax from customers without remittance to the government justified the penalty imposition.

Regarding the penalty calculation discrepancy, the appellant raised concerns about the penalty amount imposed compared to their calculation. The case was remanded to the original adjudicating authority to reassess the penalty amount based on the appellant's submission, ensuring a fair opportunity for the appellant to present their case.

In conclusion, the appeal was rejected concerning the penalty under Section 76, and the matter was referred back for a reevaluation of the penalty calculation, emphasizing adherence to the provisions of Section 76 and granting the appellant a reasonable opportunity to present their case effectively.