2013 (12) TMI 1374 - AT - Service Tax

Tribunal rules in favor of appellant on Service Tax liability and penalty waiver under Finance Act, 1994

ENDEKA CERAMICS INDIA PVT. LTD. Versus COMMISSIONER OF C. EX., SURAT-II

The Tribunal found in favor of the appellant in a case concerning liability to Service Tax and the application of penalty waiver provisions under the ... Levy of penalty when service tax has been paid before issuance of show cause notice - Engineering consultancy services - Held that:- appellants did not have qualified staff and they paid the Service Tax after the amounts were paid by them for the services received from time to time and discharged the liability in full which is not in dispute would show that extended period could not have been invoked in this case. Moreover entire duty liability was discharged by July, 2008 which is less than nine months from the visit of the officer which would again show that the payment was made promptly without any delay. Having regard to these facts and having regard to the fact that appellant was eligible for Cenvat credit, we find that this was a case where provisions of Section 73(3) was applicable and no show cause notice should have been issued. Further we also find that this is a case where appellants have been able to show reasonable cause for non-payment of the tax even if it is assumed that there was delay in payment in view of the revenue-neutral situation and lack of availability of qualified staff - amount paid towards Service Tax and interest thereon demanded and appropriated is sustained and penalties imposed on the appellant are set aside - Decided partly in favour of assessee. Issues: Liability to Service Tax, Application of penalty waiver provisionsLiability to Service Tax:The judgment revolves around the liability of the appellant towards Service Tax for engineering consultancy services received. The appellant initially failed to pay the full amount of Service Tax, prompting the Central Excise officer to issue show cause notices. The appellant eventually paid the outstanding amount, but penalties under Sections 77 and 78 of the Finance Act, 1994 were imposed. The main issue was whether the penalty waiver provisions under Section 73(3) or Section 80 of the Finance Act, 1994 were applicable in this case.Application of Penalty Waiver Provisions:The key question before the Tribunal was whether the appellant's case warranted the application of penalty waiver provisions. Section 73(3) of the Finance Act, 1994 allows for the waiver of penalties if the taxpayer pays the outstanding amount before the issuance of a show cause notice. The appellant argued that they had paid the Service Tax promptly after being advised by the Assistant Commissioner, and that they were eligible for Cenvat credit. The Tribunal considered the circumstances, including the lack of qualified staff and the revenue-neutral situation, and concluded that the penalty imposed on the appellant was unjustified. They held that the penalties should be set aside, while upholding the payment of Service Tax and interest.In conclusion, the judgment addressed the liability of the appellant towards Service Tax and the application of penalty waiver provisions under the Finance Act, 1994. The Tribunal found in favor of the appellant, setting aside the penalties imposed and affirming the payment of Service Tax and interest.