Liability of service tax and interest

[Guest]

My client is contactor he worked for housing board society for construction of their housing projects (LIG, MIG houses).He registered him self under construction service since 2004. but does not take registration under Construction of Residential complex Service, therefore he does not pay Tax on time and also fail to submit returns in time. In year 2007 he take registration under CCS (i.e. After two years from 16-06-2005 applicable of CCS, in 2007) and he has paid full amount of ST with interest thereon and filed all such returns up to date. Now he received show cause notice cum demand notice on 13-06-2008 in notice the department has asked to him to pay full amount of ST+Interest, penalties u/s 76,77 &78. As we had paid full tax + interest before issuance of show cause notice. In my view my client is not liable for payment of ST+interest, I want your views and some case laws for preparation of reply to departments show cause notice.

[Guest]

1.Penalty under Section 78 is leviable even in cases where the TAX and interest were paid before issue of SCN if any one of the ingedients spelt out in Section 78 was present with intent to evase tax. This depends on the wordings of the SCM. 2.Penalty under Section 76 and 78 are mutually exclusive ; This has been the decision of the Tribunal in number of cases. Now this has been made part of the ACT. 3.You can ask for waiver of penalties if reasonable cause can be shown to the satifaction of the Adjudicating authority as provided in Section 80 of the Finance Act 1994

AI Summary

Penalty for tax evasion can apply even after tax and interest are paid, though some penalties are mutually exclusive. A contractor who paid outstanding service tax and interest before a show cause notice remains exposed to penalty if elements of deliberate tax evasion are present; Section 78 permits penalty despite pre-notice payment when intent to evade is shown. Penalties under Section 76 and Section 78 are mutually exclusive, so concurrent penalties merit scrutiny, and the adjudicating authority may remit penalties on proof of reasonable cause.