2018 (7) TMI 31 - AT - Service Tax

Tribunal allows appeal, stresses re-verification on tax payment timing for penalty under Section 78.

David Constructions Versus Principal Commissioner of Central Service Tax, Chennai

The Tribunal allowed the appeal for statistical purposes, emphasizing the need for re-verification based on the claim of pre-notice tax payment to ... Penalty u/s 78 - service tax as well as interest paid much before the issuance of SCN but for the audit the fact of non-payment of service tax would not have come to the notice of the department, was incorrect - Held that:- Penalty u/s 78 could be imposed only if the assessee is found to have been indulged in fraud, collusion, mis-representation, wilful mis-statement or committed the contravention as prescribed in the section - In the case on hand, there is no allegation of short payment of tax nor is it the department’s case that the tax was paid belatedly and that nothing was discovered during the course of audit with regard to the non-payment of service tax or the short levy of the same or short payment of the same having erroneously refunded. Since the controversy rests solely on the adjudicating authority’s observation vis-à-vis the appellant’s claim of having paid service tax with interest before SCN, the matter requires re-verification - appeal allowed by way of remand. Issues:1. Non-inclusion of invoice value in service tax calculation leading to short payment of tax.2. Delayed payment of tax and interest thereon.3. Rejection of rectification applications by the Assistant Commissioner.4. Rejection of appeal by the Commissioner of Service Tax (Appeals-I).5. Applicability of penalty under Section 78 of the Act.6. Allegation of suppression and non-payment of service tax.Analysis:1. The petitioner, engaged in maintenance and construction services, faced issues during a service tax audit for not including invoice values in tax calculations, resulting in a short payment of tax. The appellant contended that the payment was made before the audit, but the adjudicating authority proceeded with an Order-In-Original based on a Show Cause Notice, highlighting non-disclosure of facts to the department.2. The petitioner's rectification applications were rejected by the Assistant Commissioner, emphasizing the need for an appeal against the Order-In-Original. Subsequent rectification attempts were also dismissed, leading to an appeal before the Commissioner of Service Tax (Appeals-I), which was rejected, indicating an attempt to cover up the appeal period.3. The main contention revolved around the penalty under Section 78, with the appellant arguing that timely payment of tax and interest negated the need for penalty unless fraud or suppression was proven. The adjudicating authority's observation regarding non-payment visibility without the audit was challenged, emphasizing that if the tax and interest were paid before the Show Cause Notice, penalty imposition might be unwarranted.4. The Tribunal found merit in the appellant's argument, stressing the need for re-verification based on the claim of pre-notice tax payment. The decision to allow the appeal for statistical purposes by way of remand indicated the necessity to reassess the situation in light of the payment timeline and its implications on penalty imposition.