2011 (9) TMI 114 - HC - Service Tax

Sec.73(3) bars issuing Sec.73(1) notices for amounts where service tax and interest were already paid, negating Sec.76 penalties

COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX Versus M/s ADECCO FLEXIONE WORKFORCE SOLUTIONS LTD

HC held that where the assessee paid the service tax and interest for delayed payments and furnished that information before issuance of any show-cause ... Penalty under Sec. 76 - HELD THAT:- The assessee has paid both the service tax and interest for delayed payments before issue of show cause notice under the Act. Sub-Sec.(3) of Sec. 73 of the Finance Act, 1994 categorically states, after the payment of service tax and interest is made and the said information is furnished to the authorities, then the authorities shall not serve any notice under Sub-Sec.(1) in respect of the amount so paid - Therefore, authorities have no authority to initiate proceedings for recovery of penalty under Sec. 76 of the Act - The appeals are dismissed in favour of assessee. Issues:Assessee challenging penalty under Sec. 76 of Finance Act, 1994.Analysis:The judgment involves the assessee challenging the penalty imposed by the Tribunal and the Appellate Commissioner under Sec. 76 of the Finance Act, 1994. The key issue revolves around whether the assessee is liable to pay the penalty. The facts are undisputed that the assessee paid both the service tax and interest for delayed payments before the issuance of a show cause notice under the Act. The judgment highlights the provision of Sub-Sec.(3) of Sec. 73 of the Finance Act, 1994, which states that once the service tax and interest are paid and the information is furnished to the authorities, no notice shall be served under Sub-Sec.(1) in respect of the amount paid. Therefore, the authorities are not authorized to initiate penalty proceedings under Sec. 76 of the Act in such circumstances.The judgment criticizes the assessing authority and the appellate authority for their misconception that delayed tax payment, followed by payment with interest, is not acceptable in law. It emphasizes that the law explicitly prohibits the initiation of penalty proceedings against individuals who have paid tax and interest promptly after the due date. The judgment underscores the duty of authorities to act in accordance with the law and target defaulters who fail to pay tax and interest despite notices, rather than harassing compliant taxpayers. The court stresses the need for authorities to align their actions with the legislative intent behind the enactment and the specific provision of Sub-Sec.(3) of Sec. 73. It warns that any issuance of notices contrary to the statutory provision would render the issuing authority liable for punishment, not the recipient. The judgment urges authorities to refrain from wasting time and resources on unnecessary actions against law-abiding taxpayers and directs the Commissioner of Large Tax Payers Unit to issue a circular to prevent contravention of Sub-Sec.(3) of Sec. 73.In conclusion, the court finds no merit in the appeals and dismisses them. The judgment serves as a reminder to authorities to adhere to the law, avoid unnecessary harassment of compliant taxpayers, and take appropriate actions against those who violate statutory provisions. The directive to issue a circular aims to prevent future contraventions and ensure compliance with the provisions safeguarding taxpayers who fulfill their obligations by paying tax and interest promptly.