During CERA Audit for the pre GST period, Auditors raised a para regarding deposition of service tax under RCM on Ocean Freight. We were actually unaware of such developments and due to ignorance we didn't comply on deposition of service tax under rcm on goods imported during 2016-17. Once Audit Para was raised by the Audit Team, we deposited the amount along with interest applicable for the period in dispute .
Now Department is forcing us to deposit penalty as well @ 15% of service tax. Is penalty provision applicable. Kindly suggest
Company Disputes 15% Penalty for Ocean Freight Service Tax Under RCM, Citing Section 73 of Finance Act, 1994 During a CERA audit for the pre-GST period, an issue was raised regarding non-payment of service tax under the reverse charge mechanism (RCM) on ocean freight for goods imported in 2016-17. The company paid the due service tax and interest after the audit. However, the department is demanding a 15% penalty. An expert advised that penalties are not applicable as per Section 73 of the Finance Act, 1994, since the dues were paid before a notice was served. The expert also provided case laws supporting this position, emphasizing that the penalty provisions of the Central Excise Rules do not apply. (AI Summary)
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