Advance payment and written intimation barred show cause notice, extinguishing service tax demand, interest and penalty under Section 73(3).

Where service tax and interest on rent-a-cab services under reverse charge were paid before the show cause notice and the department was informed in writing, Section 73(3) of the Finance Act, 1994 barred issuance of notice for the amount so paid. The CESTAT held that the demand could not survive on that settled liability, and the connected interest and penalty also failed. The allegation of suppression was not sustained, as the liability had been paid and intimated before notice, so invocation of the extended period was not justified.

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Issues: Whether service tax, interest and penalty proceedings could survive when the assessee had paid the tax and interest before issuance of show cause notice and had intimated the department in writing, and whether invocation of the extended period was justified.

Analysis: The demand arose from rent-a-cab services availed under reverse charge mechanism. The assessee paid the service tax and interest after the audit objection and before the show cause notice, and the payment was also brought to the department's notice. On a plain reading of Section 73(3) of the Finance Act, 1994, where the tax short-paid is paid before service of notice and the Central Excise Officer is informed in writing, no notice under Section 73(1) can be served for the amount so paid. Since the payment and intimation were already on record, the notice could not validly be issued for the settled demand. In these circumstances, the allegation of suppression for invoking the extended period also could not be sustained.

Conclusion: The show cause notice and the consequent demand, interest and penalty could not be sustained; the issue was decided in favour of the assessee.

Ratio Decidendi: Where service tax and interest are paid before issuance of notice and the department is informed in writing, Section 73(3) of the Finance Act, 1994 bars issuance of notice for the amount so paid, and suppression cannot be presumed merely because the liability was detected during audit.

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