2023 (3) TMI 233 - AT - Service Tax

Appeal success: Penalties overturned for timely tax payment. Importance of compliance emphasized.

The Tribunal allowed the appellant's appeal, setting aside penalties under Sections 77 and 78 of the Finance Act, 1994, due to timely payment of service ... Levy of penalty u/s 76, 77 and 78 of FA - levy of service tax came into effect of Goods Transport Services from 01.01.2005 under reverse charge mechanism, as it was new entry, the appellant did not pay service tax - amount paid by transport agency on account of Goods Transport Services, was appropriated, after adjudication - HELD THAT:- Considering the facts that there is no dispute that the service tax has been paid by the service provider, although the same was paid by the assesse under reverse charge mechanism and the same has been paid and appropriated. Similar case has been decided by this Tribunal in the case of CST, KOLKATA VERSUS M/S KAMRUP COKE INDUSTRIES, M/S PARASNATH COKE INDUSTRIES, M/S SKJ COKE INDUSTRIES AND VICE VERSA [2018 (11) TMI 1927 - CESTAT KOLKATA], where this Tribunal held that We agree with the submissions made by the assessee that when service tax amount has been deposited before the Show Cause Notice, no penalty should be imposed. Thus, the assessee is entitled for benefit of Section 80 of the Finance Act, 1994 as the amount of service tax has already been paid. Therefore, the appellant is entitled for immunity from imposing penalty. Therefore, the order imposing penalty under Sections 77 & 78 of the Finance Act, 1994 on the assessee are set aside and the order dropping the penalty under Section 76 of the Finance Act, 1994, is upheld. Appeal allowed - decided in favour of assessee. Issues:Imposition of penalty under Sections 77 and 78 of the Finance Act, 1994, and dropping the penalty under Section 76 of the Finance Act, 1994.Analysis:Issue 1: Imposition of Penalty under Sections 77 and 78The case involved an appeal against the imposition of penalties under Sections 77 and 78 of the Finance Act, 1994. The appellant, a manufacturer of low ash metallurgical coke and coke breeze, had taken services from Goods Transport Services without initially paying service tax. The service tax liability under reverse charge mechanism arose from January 1, 2005. The transporters had paid the service tax, which was later sought to be appropriated against the demand of service tax payable by the appellant. The Tribunal considered the fact that the service tax had been paid by the service provider and was duly deposited before the issuance of the show cause notice. Referring to a similar case, the Tribunal held that when the service tax amount had been deposited before the notice, no penalty should be imposed. The Tribunal agreed that the appellant was entitled to immunity from penalty under Section 80 of the Finance Act, 1994, as the service tax had already been paid. Consequently, the order imposing penalties under Sections 77 and 78 was set aside, granting relief to the appellant.Issue 2: Dropping the Penalty under Section 76The Revenue's appeal contested the dropping of the penalty under Section 76 of the Finance Act, 1994. The Tribunal noted that the Revenue did not dispute that the service tax amount had been duly deposited before the issuance of the show cause notice. The Tribunal agreed with the appellant's argument that in light of the new concept of levying service tax on Goods Transport Agency services under reverse charge, there was a reasonable case for non-payment of tax. Citing relevant legal precedents, the Tribunal held that no penalty should be imposed under Section 76 and 77. The appeals filed by the Revenue were rejected on the grounds of lacking merit. The Tribunal upheld the decision to drop the penalty under Section 76 of the Finance Act, 1994.In conclusion, the Tribunal allowed the appeal filed by the appellant, setting aside the penalties under Sections 77 and 78, and dismissed the appeal filed by the Revenue. The decision highlighted the importance of timely payment of service tax and the applicability of relevant legal provisions in determining the imposition of penalties under the Finance Act, 1994.