Benefit of section 73(3) admissible even if short payment discovered during the course of audit.

PJ/Case Law/2013-14/2013

Case:-R.K. TRADING CO. VERSUS COMMISSIONER OF SERVICE TAX, AHMEDABAD

Citation:- 2013(31) S.T.R. 615 (Tri.- Ahmd.)

Brief Facts:-Appellant was paying service tax on the GTA services received by them from 2004 onwards. During the audit of the appellant's records in the year 2007-2008, it was found that appellants had not paid service tax of Rs. 34,279/- during the year 2004-2005 and 2006-2007. When this was pointed out by the audit party of the department, appellants immediately paid the amount with interest in January 2008 itself. Thereafter proceedings were initiated which has culminated in imposition of penalty under Sections 76 & 78 of Finance Act, 1994 equal to service tax liability determined.

Appellant Contentions:-Learned Counsel submitted that there was no detailed discussion about the nature of suppression of facts by both the lower authorities and both of them have simply stated that mere non-payment of service tax is suppression and intention to evade service tax has been presumed and penalties have been imposed. He submits that appellant was following the accrual method for accounting and for payment of service tax, the service tax is payable only when the GTA service charges were paid and consequently because of omissions on the part of personnel handling the accounts the mistake occurred and the very fact that appellants had paid service tax more than Rs. 1.08 lakhs in 2004-2005 and more than Rs. 1,34,000/- during the year 2006-2007 would show that they would not have tried to avoid paying a small amount of Rs. 34,279/- and make themselves liable for payment of interest and penalty. He also relies upon the provisions of Section 73(3) of Finance Act, 1994 which provides that whenever an assessee pays the service tax and interest awaiting by himself or by the officers before the issue of show cause notice, no show cause notice shall be issued and therefore in this case show cause notice itself should not have been issued leave alone imposition of penalty.

Respondent Contentions:-The respondent submits that appellants have not been able to explain properly as to how they failed to pay the service tax and the explanation that it was a clerical error has not been explained satisfactorily.

Reasoning of Judgment:- Tribunal has considered the submissions made by both the sides. It is found that both the lower authorities have taken the view that mere non-payment of service tax amounts to suppression and the circumstances under which omission/shortly be occurred have not been discussed and considered. Further, it is also found that according to provisions of Section 73(3) of Finance Act, 1994, even if the amount was ascertained by audit party, if the assessee pays the amount before issue of show cause notice , no show cause notice could have been issued. After going through the records, it is found that both lower authorities have not given enough justification for invoking suppression in this case. In view of the above circumstances, it was felt that in this case there was no need for issue of show cause notice and initiating proceedings against the appellant. Therefore the appeal is allowed with consequential relief to the appellant.

Decision:-Appeal is allowed.

Comment:- The gist of this case is that the provisions of Section 73(3) of Finance Act, 1994 which provides that whenever an assessee pays the service tax and interest before issuance of show cause notice, no show cause notice shall be issued and consequently no penalty can be imposed. However, the benefit of this section is hardly extended by the revenue authorities and harsh actions are initiated against the assessees even for bonafide mistakes on their part. Further, it is also immaterial whether the short payment was made good by the assessee suo motto or on being pointed out by the revenue authorities.

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PJ/Case Law/2013-14/2013

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