Wrong service tax head treated as valid payment; separate demand and penalty set aside absent mala fide intent.

Service tax paid under the wrong accounting head for the same taxable service was treated as valid discharge of liability, because service-wise heads after the negative-list regime were only for accounting purposes and did not create a fresh non-payment. The department could make internal adjustment, but a separate demand could not survive once tax for the same transaction had already been paid. Penalty was also unsustainable where tax and interest had been paid and the record showed no mala fide intention to evade. The impugned order was modified by deleting the penalty and accepting the earlier payment as sufficient discharge.

---

---

Issues: (i) Whether service tax paid under the head of renting of immovable property could be treated as payment towards port service for the same taxable transaction. (ii) Whether penalty was sustainable when the tax and interest had been paid and no mala fide intention to evade was shown.

Issue (i): Whether service tax paid under the head of renting of immovable property could be treated as payment towards port service for the same taxable transaction.

Analysis: The taxable regime after introduction of the negative list treated service tax as a single levy, with service-wise accounting heads serving only statistical purposes. In view of the departmental circular relied upon, payment under an incorrect service head did not amount to non-payment of service tax where the tax relating to the same service had already been discharged. The department could make internal accounting adjustment, but a fresh demand on the footing of non-payment could not survive.

Conclusion: The tax paid under the head of renting of immovable property was rightly treated as payment towards port service, and no separate demand could be sustained.

Issue (ii): Whether penalty was sustainable when the tax and interest had been paid and no mala fide intention to evade was shown.

Analysis: The entire tax liability had been discharged along with interest. The appellant was a Government of India enterprise, and the record did not support an inference of deliberate evasion. In these circumstances, the foundation for imposition of penalty was absent.

Conclusion: The penalty was unsustainable and was set aside.

Final Conclusion: The impugned order was modified by deleting the penalty and by treating the tax already paid under the wrong head as sufficient discharge of the liability for the same service.

Ratio Decidendi: Where service tax has been paid for the same taxable service under a wrong accounting head, the payment cannot be treated as non-payment of tax, and penalty cannot be imposed in the absence of mala fide intent and when tax with interest has already been discharged.

---