Settlement Commission access in service tax dispute restored after substantial tax and interest payments were made

Where an assessee admitted service tax liability and made substantial payments towards tax and interest, the request to be permitted to approach the Settlement Commission should have been considered before finalisation of the demand and penalty order. As the authority did not consider that request and proceeded with the order in original, the Madras HC set aside the impugned order and allowed the assessee time to initiate settlement proceedings.

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Issues: Whether the assessee, having admitted the service tax liability and made substantial payments towards tax and interest, was entitled to have its request to approach the Settlement Commission considered, and whether the impugned demand and penalty order deserved to be set aside.

Analysis: The assessee had admittedly expressed willingness to discharge the entire tax liability along with interest and had also made substantial payments before and after the impugned order. In these circumstances, the request made for permission to approach the Settlement Commission ought to have been considered. Since the authority did not consider that request and proceeded with the order in original, the Court found it appropriate to enable the assessee to pursue settlement proceedings.

Conclusion: The impugned order was set aside and the assessee was granted time to approach the Settlement Commission.

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