Tribunal waives penalty for service tax short payment in mining sector case

The Tribunal upheld the confirmation of demand with interest but waived the penalty under Section 78 in a case involving short payment of service tax by a mining sector service provider. Despite finding suppression of fact, the Tribunal considered the appellant's voluntary payment upon detection and the availability of data in their books as reasonable cause to waive the penalty. The appellant's appeal was allowed based on these grounds.

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Issues:
Short payment of service tax, imposition of penalty under Section 78, applicability of Section 73(3), suppression of fact.

Analysis:
The appeal was filed against an Order-in-Appeal upholding an order-in-original confirming short payment of service tax by the appellant, who is a registered service tax provider in the mining sector. The appellant had paid a partial amount without detection, and upon departmental scrutiny, the remaining balance was paid along with interest. The department issued a show cause notice proposing demand confirmation, interest, and penalty under Sections 76 and 78 of the Finance Act, 1994. The adjudicating authority confirmed the demand, interest, and imposed an equal penalty. The appellant contended that the short payment was due to an accounting mistake by a new clerk and voluntarily paid the amount upon detection. The appellant sought waiver of penalty under Section 78 invoking Section 73(3) as they had paid the entire service tax with interest before the show cause notice was issued.

The Revenue argued that there was suppression of fact as the short payment was not declared in ST3 returns or intimated to the department until pointed out. The Revenue contended that Section 73(3) immunity does not apply if there is suppression of fact, and the penalty under Section 78 was rightly upheld by the Commissioner. The Tribunal noted that while the appellant did not declare the correct service tax value in returns, the data was available in their books and was retrieved during scrutiny. As the appellant paid the entire service tax with interest upon detection, the Tribunal held that the penalty under Section 78 should not have been imposed. The Tribunal agreed that Section 73(3) does not apply in cases of established suppression of fact, but considering the overall circumstances and the availability of data in the books, the Tribunal found reasonable cause to waive the penalty under Section 78. Thus, the confirmation of demand with interest was maintained, but the penalty under Section 78 was waived, and the appeal was allowed accordingly.

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