Appeal allowed against penalty after service tax payment with interest before show-cause notice under Section 78

The CESTAT Chandigarh allowed the appeal challenging penalty under Section 78 and invocation of extended limitation period. The appellant had paid service tax with interest before the show-cause notice was issued. The Tribunal held that mere non-payment of service tax and non-filing of returns insufficient to invoke extended limitation period without evidence of positive suppression acts. Following Karnataka HC precedent, the Tribunal ruled that Section 73(3) of Finance Act 1994 bars authorities from issuing notices after service tax and interest payment, making the impugned order unsustainable.

---

---

Issues involved:
The issue to be decided is whether the appellants are liable to pay penalty under Section 78 when the service tax was paid along with interest before the issuance of show-cause notice.

Summary:
The appellants registered under Service Tax and GST paid the service tax along with interest as pointed out by the audit. Subsequently, a show-cause notice was issued demanding service tax and interest, along with penalties under Sections 77 and 78 of the Finance Act, 1994. The appellant contended that the show-cause notice was time-barred and that no suppression of facts occurred. The appellant argued that the extended period for issuing the notice had expired, and the impugned order was passed without due consideration. The Department reiterated the findings of the impugned order.

The Tribunal found that no evidence of suppression of facts by the appellants was presented to invoke the extended period. It was noted that non-payment of service tax and non-filing of returns does not automatically warrant an extension of the limitation period. Citing legal precedents, including the case of Adecco Flexione Workforce Solutions Ltd., the Tribunal emphasized that authorities should not harass taxpayers who promptly pay service tax with interest. Additionally, the Tribunal highlighted the case of M/s G.D. Goenka Pvt. Ltd., which held that disputing the audit findings does not imply an intent to evade payment. The Tribunal concluded that the impugned order lacked legal sustainability and set it aside, allowing the appeal with consequential relief as per law.

Separate Judgment:
No separate judgment was delivered by the judges in this case.

---