No penalty when service tax and interest paid before issue of SCN.

PJ/Case Laws/2012-13/1549

Case:-M/s THE PROFESSIONAL COURIERS Versus COMMISSIONER OF CUSTOMS,CENTRAL EXCISE & SERVICE TAX, HYDERABAD

Citation:- 2013-TIOL-600-CESTAT-BANG

Brief Facts:-The appellant is a service provider. They are liable t o pay service tax on a quarterly basis. For the quarter October to December 2009, they ought to have paid service tax on or before 05.01.2010 (due date as per Rule 6 of the Service Tax Rules 1994). But, in respect of some transactions, they could not pay service tax by the said date. In such case, they paid service tax with interest during the period from 08.01.2010 to 29.03.2010.The amount of service tax and interest so paid are Rs.36,69,665/- and Rs.71,422/- respectively. On 01.09.2010, the department issued a show cause notice for levy of penalty under Section 76 of the Finance Act, 1994. This demand was contested. The adjudicating authority imposed a penalty of Rs. 200/- per day of default or at the rate of 2% of service tax, whichever is higher. An appeal filed by the assessee against this penalty came to be dismissed by the Commissioner (Appeals).The appellant quantifies the penalty at Rs. 63,800/- for purposes of waiver and stay.

Appellant Contentions:-The judgment relied on by the learned counsel for the appellant is CCE & ST, LTU, Bangalore Vs. Adecco Flexione Workforce Solutions Lt d. [2012 (26) S.T.R. 3 (Kar.)] = (2011-TIOL-1944CESTAT-BANG), wherein it was held thus:

"Facts are not in dispute. The assessee has paid both the service tax and interest for delayed payments before issue of show-cause notice under the Act. Sub-sec.(3) of Section 73 of the Finance Act, 1994 categorically states, after the payment of service tax and interest is made and the said information is furnished to the authorities, then the authorities shall not serve any notice under sub-sec. (1) in respect of the amount so paid. Therefore, authorities have no authority to initiate proceedings for recovery of penalty under Section 76 of the Act."

Respondent Contentions:-The respondent reiterated the findings of the lower authorities.

Reasoning of Judgment:-On a perusal of the records and hearing both sides, Tribunal have found strong prima facie case for the appellant against the penalty imposed on them under Section 76 of the Finance Act 1994. It is also found that the simple issue arising in this case is already covered by a judgment of the jurisdictional High Court. Therefore, after dispensing with pre- deposit, the appeal itself is taken up for final disposal.

We have considered the submission from both the parties and perused the record. We find that nobody has claimed that the above decision of the Hon'ble High Court was not accepted by the department. At the same time, it is not in dispute that the facts of the instant case are similar to those of the case considered by the Hon'ble High Court. Hence the Hon'ble High Court's ruling has to be followed.

Apart from the above, as rightly pointed out by the learned counsel for the appellant, an explanation added to Section 73(3) of the Finance Act 1994 by Parliament vide the Finance Act 2010 consolidates the appellant's case. Section 73(3) (without the proviso thereto) and the aforesaid explanation read as follows:

"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 38 [Central Excise Officer] of such payment in writing, who, on receipt of such information shall not serve any notice under subsection (1) in respect of the amount so paid:

39b [Explanation 2.- For the removal of doubts, it is hereby declared that no penalty under any of the provisions of this Act or the Rules made there under shall be imposed in respect of payment of service tax under this sub-section and interest thereon.]"

In view of the law and case law cited before me, the impugned order is set aside and this appeal is allowed. The stay application also stands disposed of.

Decision:-The appeal is allowed.

Comment:-The crux of this case is that no penalty can be imposed when the demand along with interest stands paid by the assessee before issuance of SCN in view of the specific provisions contained in section 73(3) of the Finance Act, 1994.

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PJ/Case Laws/2012-13/1549

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