Penalty provisions ...

[Rizwan Ullah]

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

[KASTURI SETHI]

Since you have paid due Service Tax along with interest on being pointed out by the Department (Whether pointed out by CERA or Internal Audit of the department, it does not matter),

Extract of Section 73 of the Finance Act, 1994

(3) 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 :

CERA also sends audit report to the department of Central Excise & Service Tax. Hence the department stands informed regarding deposit of ST along with interest

There is a plethora of case laws in your favour. Penalty is not imposable at all. If more information is required, let me know through this forum.

[Rizwan Ullah]

Thanx Kasaturi Sir,

Department's Audit Team has informed that there are penalty provisions as per Central Excise Rules , Sir, could u please refer some case laws in tghis regard which will help us to file a suitable reply.

[KASTURI SETHI]

You are mistaken. Neither Central Excise Rules or nor Central Excise Act do not come into play. You have contravened the provisions of Service Tax law (Finance Act, 1994). Service Tax law has its own Sections 77 and 78 for imposition of penalty. As per Section 73 of the Finance Act, 1994 the department cannot issue Show Cause Notice for imposition of penalty under Section 77 or 78 as dues Service Tax along with interest stands deposited.

[Rizwan Ullah]

Thanx ..a lot Sir,

[Rizwan Ullah]

Kasturi Sir

If u could share any case law , it would be very beneficial.

[KASTURI SETHI]

Dear Sh.Razwan Ullah,

There are so many case laws in your favour. I am posting a few case laws.

(52) S.T.R. 143 (Tri. - Kolkata) = 2017 (9) TMI 261 - CESTAT KOLKATA KALINGA COMMERCIAL CORPN. Versus COMMISSIONER OF C. EX. & S.T., BBSR-I

2017 (49) S.T.R. 78 (Tri. - Mumbai) = 2017 (1) TMI 304 - CESTAT MUMBAI UDAYSINGRAO GAIKWAD SSK LTD. Versus COMMISSIONER OF C. EX., KOLHAPUR

2017 (48) S.T.R. 165 (Tri. - Hyd.) = 2016 (9) TMI 844 - CESTAT HYDERABAD POWER MECH PROJECTS LTD. Versus COMMISSIONER OF CUSTOMS, GUNTUR

2017 (47) S.T.R. 125 (Kar.) = 2011 (8) TMI 1260 - KARNATAKA HIGH COURT COMMR. OF S.T., BANGALORE Versus C AHEAD INFO TECHNOLOGIES INDIA P. LTD.

2016 (46) S.T.R. 623 (Tri. - Mumbai) = 2015 (8) TMI 862 - CESTAT MUMBAI SHIVNATH HANUMANT KANDI Versus COMMISSIONER OF C. EX., AURANGABAD

[Prudhvi Jakkula]

Kasturi sir, Hats off for your patience.

[KASTURI SETHI]

Sh. Prudhvi Jakkula Ji,

You are welcome. My mission is to help the public/querists by sharing knowledge so that they may get natural justice. They should not become victim of injustice due to lack of knowledge in this field. Nobody has specialization in all the fields.

AI Summary

Voluntary payment under Section 73 prevents penalty where service tax and interest are deposited after audit detection. A voluntary payment of service tax and interest, informed to the tax officer before issuance of a show-cause notice, prevents initiation of proceedings and precludes imposition of penalty under the service tax statutory framework; Central Excise Act and Rules do not apply to service tax liabilities on reverse-charge ocean freight, and tribunal and high court precedents support non-imposability of penalty where tax plus interest have been deposited after audit detection.