2018 (8) TMI 1402 - AT - Service Tax

Tribunal overturns penalty imposition in favor of appellant under Finance Act, 1994.

The Tribunal ruled in favor of the appellant in an appeal against penalty imposition under Sections 77 and 78 of the Finance Act, 1994. The appellant had ... Payment of service tax with interest on pointing out and intimation to the Department - show cause notice not required under Section 73(3) of the Finance Act, 1994 - limitation for issuance of show cause notice - penalty under Sections 77 and 78 of the Finance Act, 1994Payment of service tax with interest on pointing out and intimation to the Department - show cause notice not required under Section 73(3) of the Finance Act, 1994 - penalty under Sections 77 and 78 of the Finance Act, 1994 - limitation for issuance of show cause notice - Validity of imposition of penalties under Sections 77 and 78 where the assessee paid the service tax with interest and intimated the Department under Section 73(3) - HELD THAT: - Section 73(3) provides that where the assessee pays the whole of the service tax along with interest on being pointed out and intimates the Department, issuance of a show cause notice is not required. In the present case the appellant paid the disputed service tax along with interest and gave intimation to the Department. The show cause notice impugned in the proceedings was issued after the normal period of limitation following such intimation. The Revenue's reliance on a decision under the Central Excise law (CCE, Bangalore-II v. Alsthom Instrument Transformers) was distinguished because that case involved non-payment of interest and arose under a different statute without a provision analogous to Section 73(3). The Tribunal's earlier view in Gupta Coal Field & Washeries Ltd. was noted to support the proposition that no show cause notice is required where tax with interest has been paid and the Department has been intimated. Applying this principle, the show cause notice in the present case was not maintainable and consequently the penalties imposed under Sections 77 and 78 could not be sustained.The show cause notice was not required and the penalties imposed under Sections 77 and 78 are set aside.Final Conclusion: The appeal is allowed to the extent that the impugned order imposing penalty is set aside; no penalty can be imposed where the assessee had paid the service tax with interest and intimated the Department under Section 73(3), and the show cause notice was issued beyond the permissible period. Issues:Appeal against penalty under Sections 77 and 78 of the Finance Act, 1994.Analysis:The appellant contested the penalties imposed on them under Sections 77 and 78 of the Finance Act, 1994. The case originated from an intelligence report indicating non-payment of service tax by the appellant. Following an investigation, the appellant paid the service tax along with interest and requested the Department to drop the proceedings under Section 73(3) of the Finance Act, 1994. Subsequently, a show cause notice was issued for penalty imposition, which was initially dropped by the adjudicating authority under Section 73(3) but later imposed by the Commissioner (Appeals). The appellant appealed against this penalty imposition.During the hearing, the appellant disputed only the imposition of penalties as per the impugned order. Section 73(3) of the Act stipulates that if the assessee pays the service tax along with interest upon pointing out and informs the Department, a show cause notice is not necessary. In this case, the appellant complied with these requirements, and any show cause notice should have been issued within one year from the intimation date. However, the notice was issued after the limitation period had expired.The Revenue relied on a decision by the Karnataka High Court to argue for penalty imposition. However, the Tribunal found this decision irrelevant as it involved a different scenario where interest was not paid by the appellant and pertained to the Central Excise Act, lacking similarity with Section 73(3) of the Act. Instead, the Tribunal referenced a case where it was held that no show cause notice is needed if the assessee pays the service tax with interest upon pointing out by the Revenue and informs the Department.Consequently, the Tribunal concluded that since the show cause notice was not required to be issued to the appellant, no penalty could be imposed. The impugned order imposing the penalty was set aside, and the appeal was disposed of accordingly.