Relevant Provision of Finance Act, 1994 (Service Tax)

Section 73

Section 76

Section 77

Section 78

Section 80

Circular F. No. 137/167/2006-CX-4 dated 3-10-2007

In the present case, the honorable CESTAT has decided the four appeals together having the same issue regarding penalty.

All the four appellants have deposited service tax along with penalty before issue of SCN but the adjudicating authority have confirmed the penalty. In view of above statutory provisions, honorable CESTAT held that:

Our attention was also invited to Section 73 (3) of the Finance Act and also a Board's Circular based on that. The Circular and also the Section 73(3) provides that if the assessee cleared the Service Tax due along with interest on his own and even on the insistence of the departmental authority, then no penalty proceedings can be taken against them. In other words, all the proceedings against the appellants will be deemed to have been concluded. In view of the above position, we are of the view that the impugned revisionary orders, enhancing the penalties and imposing penalties under section 78, are not in order. Further, the impugned order in Sl. No. 4 is also very harsh especially when the appellants had paid the entire amount of Service Tax and interest even before the issue of Show Cause Notice. In such circumstances, we allow the appeals with consequential relief, if any. The impugned orders are set aside.

(For full text of judgment - visit 2008 -TMI - 3793 - CESTAT, BANGALORE)

No penalty for service tax when tax and interest are paid before a show cause notice, per Section 73(3) guidance. Payment of service tax and interest before issuance of a show cause notice bars penalty proceedings: statutory provisions together with a Board circular provide that clearing the tax with interest voluntarily or on departmental insistence prior to initiation of penalty proceedings operates to conclude proceedings and precludes imposition or enhancement of penalties; tribunal set aside orders imposing or increasing penalties where full tax and interest were paid pre SCN.