adjudication cases

[IMMANUEL NEIHSIAL]

Sir,

The party has paid service tax along with interest/penalty before issuance of SCN. In the adjudication process what will be the penalty to be imposed upon the party under section 78 of Finance Act,1994.

thank you.

[KASTURI SETHI]

Dear Querist,

Your query is contradictory. You are asking for rate of penalty before issuance of SCN and at the same time you talk of adjudication process. Adjudicating process commences only if show cause notice is issued. If the elements of suppression, fraud etc. with an intent to evade ST is involved, penalty has to be paid. However, 15% of penalty of Service Tax payable (evaded) is payable if Service Tax along with interest is paid within 30 days of the date of service of SCN. and 25% of penalty of service tax evaded is payable within 30 days of the receipt of Adjudication Order.

There is no such provision under Section 78 which may give any benefit before SCN.

Under Section 76, if Service Tax along with interest within 30 days of the date service SCN, no penalty is payable. So see the difference between both Sections.

[DR.MARIAPPAN GOVINDARAJAN]

Section 73 (3) of the Finance Act, 1994 provides that where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the person chargeable with the service tax, or the person to whom such tax refund has erroneously been made, may pay the amount of such service tax, chargeable or erroneously refunded, on the basis of his own ascertainment thereof, or on the basis of tax ascertained by a Central Excise Officer before service of notice on him under sub-section (1) in respect of such service tax, and inform the Central Excise Officer of such payment in writing, who, on receipt of such information shall not serve any notice under sub-section (1) in respect of the amount so paid.

If you have informed the Department of your payment of tax and interest the Department will not issue the show cause notice.

In your case no penalty is leviable.

[Ganeshan Kalyani]

No penalty if tax paid before issuance of show cause notice.

[IMMANUEL NEIHSIAL]

thanks for the reply.

When the investigation was initiated against the party, the party has requested the investigating agency not to issue the SCN by giving assurance that all the dues will be cleared shorty. The party has cleared all the dues but they failed to inform the Department and in the meantime the Department has issued SCN. In this case what will be the penalty to be imposed upon the party under section 78 of Finance Act,1994? Is penalty imposable or not?

thank you.

[KASTURI SETHI]

100 % penalty will be imposed but penalty can be reduced by 75 % if you deposit with in 30 days from the date of communication of Adjudication Order. Has a period of 30 days has crossed from the date of service of SCN ?

AI Summary

Service tax penalty exposure where tax not informed before notice; reductions possible on timely deposit during adjudication. Voluntary payment of service tax with interest before issuance of a show-cause notice, if communicated to the Department, prevents service of the SCN; separate provisions relieve penalty where tax plus interest is paid within a short prescribed period after service of an SCN, while suppression or fraud triggers a penalty provision that may be reducible by deposit after adjudication.