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TMI Blog2018 (7) TMI 433X X X X Extracts X X X X X X X X Extracts X X X X ..... sation for the delay in payment, was also paid after issuance of SCN and much before issuing the Order-in-Original - The conduct of the appellant in paying up service tax and interest, and the categoric finding of the Commissioner that there is no intention to evade tax, persuades us to hold that appellant has established reasonable cause for invoking Section 80 of the Act ibid - penalty u/s 76 set aside. Appeal allowed in part. - Application No. ST/MISC[CT]/41510/2017, Appeal No. ST/00090/2012 - Final Order No. 41943 / 2018 - Dated:- 28-6-2018 - Hon ble Ms. Sulekha Beevi C.S., Member (Judicial) And Hon ble Shri Madhu Mohan Damodhar, Member (Technical) Shri. J. Shankaraman, Advocate for the Appellant Shri. A. Cletus, ADC (AR) for the Respondent ORDER Per Bench The facts of the case are that the appellants are engaged in providing specialized professional cleaning services. During the course of verification of records, it was noticed that appellants had collected, from their clients, apart from service charges, service tax liability, for the period August, 2008 to December, 2009, however, did not remit the same to the exchequer within the due date. It als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s from the service receivers. The appellant paid entire demand of ₹ 4,48,35,145/- towards service tax even before issuance of present Show Cause Notice, for the period August, 2008 to December, 2009 and intimated the Department. They also paid interest of ₹ 37,27,677/- after issue of Show Cause Notice. The present Show Cause Notice dated 12.05.2010 is also issued alleging suppression and invoking extended period. The Department was fully aware that appellant was making sincere and earnest efforts to pay up earlier dues and, thereafter, the demand for subsequent period was also paid before SCN. There was delay to pay interest before SCN. The adjudicating authority in the impugned order held that there is no mala fide intention on the part of the appellant in not paying the service tax and, therefore, did not impose penalty under Section 78. However, he imposed penalty under Section 76 and 77. (iii) Since the tax was paid much prior to the Show Cause Notice, there was no mala fide intention on the part of the appellant and the Department ought to have given a quietus to the issue by not issuing a Show Cause Notice in terms of Section 73(3) of the Finance Act, 1994. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heir failure to discharge their tax liability. Mismanagement of funds, payment of older arrears on priority leading to financial hardship cannot be called reasonable cause for failure to discharge tax liability. Hence, financial hardship cannot be the ground for waiving penalty under Section 80 of the Finance Act, 1994. Even for the earlier period October, 2006 to July, 2008, appellants had made such delayed payments of service tax and penalty under Section 78 of the Finance Act had also been imposed on them in the adjudication order. In respect of the proceedings having been initiated for earlier period, the appellants continued to indulge in the same behaviour even for the present period of dispute. Imposition of penalty under Section 78 requires that certain ingredients like suppression of facts, misstatement, etc., with intention to evade payment of duty are present. However, for imposition of penalty under Section 76, during the period of dispute, the law was that any person who fails to pay such tax shall pay a penalty which shall not be less than two hundred rupees for every day during which such failure continues, etc. Hence, imposition of penalty under Section 76 is auto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the service tax payable from August, 2008 also got accumulated. However, in respect of the delayed payments, they have paid up the entire liabilities of ₹ 4.51 crores by March, 2010 including service tax payable up to the month of March, 2010, along with interest. 5.5 We note the appellants submission that all the ST-3 returns were filed before issue of Show Cause Notice. 5.6 We also find that the Ld. Adjudicating authority in para 7.0 and para 7.1 of the impugned order, has analysed the allegation as to whether appellants had intention to evade payment of service tax. The adjudicating authority has found that except for the delay in payment of service tax and non-filing of ST-3 returns in time, there is no intention to evade payment of service tax on the part of appellant and, therefore, dropped the proposal to impose penalty under Section 78 of the Act ibid. The said para 7.1 of the impugned order makes for interesting reading : 7.1 I have carefully examined the above arguments as well as other submissions put forth by them as detailed in paras 3.0 to 3.5 above and I find that as contended by the assessee the department had full knowledge about the non payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not to impose penalty under Section 78 ibid., it would only be presumed that the Department has accepted the impugned order in toto, including the said findings. 5.8 Once it has been held that service tax has not been paid on account of fraud or collusion or wilful misstatement or suppression of facts, etc., with intention to evade payment of service tax, the provisions of Section 73(3) of the Act would hold sway in the case of the appellant and, in fact, as per the provisions of that Section, on the basis of tax ascertained by the Department Officer, if the amount is paid up by the appellant before service of a notice on him, there shall not be served any notice under Sub-section 1 of Section 73 ibid. 5.9 Viewed in this context, once no notice was required to be issued, there would be no question of imposition of any penalties on the appellant. True, at the time of issue of Notice, the competent authority may have taken the view that the provisions of Sub-section 4 of Section 73 ibid. are present in the case and, hence, Show Cause Notice will require to be issued. In fact, we are not finding fault with the issue of the Show Cause Notice in this case. But once it has been fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not file any return. In latter type of cases penalty under Section 78 would be applicable and the assessee gets concession in paying 25% of duty as penalty if such payment is made promptly. The argument raised by Revenue can be canvassed even in a situation wherein an assessee pays both tax and interest before issue of SCN. That is, the interpretation canvassed by Revenue is to the effect that anybody who pays Service Tax along with interest before issue of SCN will be liable to pay penalty under Section 76 putting such assessees at a disadvantageous position as compared to an assessee who does not make payments at all before issue of SCN. No benefit would accrue to an assessee who makes such payment if this argument is accepted. C.B.E. C. vide letter F. No. 137/167/2006-CX-4, dated 3-10-2007 has clarified that Section 73(3) cannot be interpreted in the way it is canvassed now by Revenue. However, since there is decision of the Single Member of the Tribunal in another case, a final view in this matter can be taken in another case where a Larger Bench may be deciding the matter. 5.10 The appellant has paid up the service tax belatedly before issuance of SCN. The interest whic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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