2022 (9) TMI 129 - AT - Service Tax

Tribunal sets aside penalty under Finance Act, 1994 due to lack of evidence and timely tax payment.

M/s. Rajasthan Guest House Versus Commissioner of CGST & CX, Kolkata North Commissionerate

M/s. Rajasthan Guest House Versus Commissioner of CGST & CX, Kolkata North Commissionerate - TMI Issues:1. Penalty imposition under Section 78 of the Finance Act, 1994 based on suppression of facts.2. Applicability of Section 73(3) regarding payment of service tax before issuance of show cause notice.3. Justification of penalty imposition under Section 78 in the absence of evidence of suppression.Detailed Analysis:Issue 1: The primary issue in this case pertains to the imposition of a penalty under Section 78 of the Finance Act, 1994 on the grounds of suppression of facts. The Appellant, a registered entity providing 'Restaurant' and 'Accommodation in Guest House' services, was found to have short paid service tax amounting to Rs.12,08,519 during a scrutiny of records. A Show Cause Notice was issued for recovery, including interest and penalties. Both the Adjudicating Authority and the first appellate authority upheld the penalty based on suppression, leading to the present appeal.Issue 2: The crux of the matter revolves around the interpretation and application of Section 73(3) of the Finance Act, 1994. The Appellant had voluntarily paid the service tax amount before the issuance of the Show Cause Notice, contending that there was no malicious intent to evade payment. The Appellant relied on legal precedents and argued that as per Section 73(3), if tax is paid with interest before the issuance of the notice, the authority is precluded from issuing such a notice. The Tribunal cited relevant case law to support this interpretation.Issue 3: The Tribunal analyzed the contentions of both parties and reviewed the provisions of Sections 73, 76, and 78 of the Finance Act, 1994. The Appellant's argument that there was no suppression of facts and that the tax was paid promptly upon being informed of the liability during an audit was considered. The Tribunal found that the Department failed to provide evidence of suppression or concealment to evade tax. Consequently, the Tribunal deemed the penalty imposition under Section 78 unjustified and legally untenable. The lack of findings on suppression in the impugned order further supported the decision to set aside the penalty.In conclusion, the Tribunal, relying on precedent and statutory provisions, ruled in favor of the Appellant, setting aside the penalty imposed under Section 78 of the Finance Act, 1994. The judgment emphasized the importance of timely tax payment, the absence of suppression evidence, and adherence to legal principles in penalty imposition.