Waiver of penalty when service tax along with interest is paid before issuance of SCN.

PJ/CASE LAW/2016-17/3101

Case:-S.K. ELECTRO ENGINEERS VERSUS COMMISSIONER OF CENTRAL EXCISE, NAGPUR

Citation:- 2015 (39) S.T.R. 686 (Tri. - Mumbai)

Brief Facts:-The appeal arises from Order-in-Appeal No. NGP/EXCUS/ 000/APPL/716/13-14, dated 12-7-2013 passed by Commissioner of Central Excise & Service Tax (Appeals), Nagpur. Vide the impugned order, the learned lower appellate authority has confirmed the adjudication order dated 24-12-2012 passed by the Joint Commissioner of Central Excise, Customs & Service Tax, Nagpur, wherein Service Tax demand of Rs. 12,32,434/- along with interest have been confirmed against the appellant and the amounts paid by the appellant towards the tax and interest liability have been appropriated. In addition, penalties have been imposed on the appellant under Sections 76, 77 & 78 of the Finance Act, 1994. Aggrieved of the same, the appellant is before Tribunal.

Appellants Contention:-The learned CA representing the appellant submits that the records of the appellant were audited by the audit party during 2009 and as soon as the short payment of Service Tax on their part was pointed out to them, they discharged the Service Tax liability along with interest thereon during March to December, 2009. However, a show cause notice in this case has been issued only in 27-6-2011, almost more than 1½ years after the tax and interest liability had been discharged. Section 73(3) of the Finance Act, provides for closure of proceedings if the tax along with interest liability has been discharged prior to the issue of notice. Even though the appellant had taken this plea before the authority, the same was not considered and therefore, the provision of Section 73(3) should have been given effect to and there is no case of imposition of penalty. Accordingly, he pleads for setting aside the penalties.

Respondents Contention:-The learned Assistant Commissioner (AR) appearing for the Revenue reiterates the findings of the lower authorities.

Reasoning of Judgement:-It is not in dispute that in the present case, the appellant had discharged the Service Tax liability along with interest thereon much before the issue of show cause notice and therefore, the provisions of Section 73(3) should have been given effect to, and the matter should have been closed. As the show cause notice has been issued much after the payment of statutory liabilities, there was no reason to issue the notice except for imposition of penalties. In view of the specific provisions incorporated in Section 73(3) of the Finance Act, 1994, the imposition of penalties is clearly not warranted. Accordingly, tribunal set aside the same and allow the appeal. They make it clear that only penalties under Sections 76, 77 & 78 of the Finance Act, 1994 have been set aside. There is no provision for waiver of late fee required to be paid under Rule 7(c) of the Service Tax Rules, 1944 and the appellant is liable to discharge the same.

Decision:-Appeal partly allowed.

Comment:-The analogy of the case is that as the appellant had discharged the Service Tax liability along with interest thereon much before the issue of SCN, the provisions of Section 73(3) is applicable which provides for closure of proceedings if the tax along with interest liability has been discharged prior to the issue of notice .In view of the specific provisions incorporated in Section 73(3) of the Finance Act, 1994, the imposition of penalties is clearly not warranted and accordingly the penalty imposed under Sec 76, 77 and 78 of Finance Act, 1994 set aside. But, Since there is no provision for waiver of late fee required to be paid under Rule 7(c) of the Service Tax Rules, 1944 the assessee is liable to discharge the same.
Prepared By:- Neelam Jain

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PJ/CASE LAW/2016-17/3101

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