Whether penalty is imposable under Section76 where service tax and interest stands paid before issue of SCN?

PJ-Case law-2012/13-1561

Case:-M.D. ENGINEERS VERSUS COMMISSIONER OF CENTRAL EXCISE, VARODARA

Citation:-2013(30) S.T.R. 389 (Tri.-Ahmed.)

Brief Facts:- The appellant is engaged in providing management , maintenance or repair services and during the scrutiny of ST-3 returns for the period April 2008 to September 2008, it was found that the appellant had not paid the Service Tax in respect of the service provided by them. Accordingly, a Show Cause Notice dated 19-8-2009 was issued by registered post on 26-8-2009, which according to the appellant was received on 30-8-2009.

Appellant’s Contention:-The appellant have submitted that the entire amount was paid along with interest before serving of Show Cause Notice i.e. before the date of receipt of Show Cause Notice by appellant. Therefore, he submits that this is a fit case for invocation of provisions of Section 73(3) of Finance Act, 1994, which provides that if the amount demanded is paid with interest before service notice on him, no further action will taken. In view of the above, he submits that penalty under Section 76 imposed on the appellant may be set aside. Since the issue involved is only penalty, he submits that matter may be finally decided.

Ld. Appellant would rely upon the statutory provisions of Section 73(3) of Finance Act, 1994. According to the Section 73(3) of Finance Act, 1994, if assessee pays Service Tax and interest thereon before the notice on him, no Show Cause Notice can be served to him. In this case, before the notice reached the appellant, he had paid the amount in full.

They also rely upon the Para 12.1 of the circular No. 97/8/2007-S.T, dated 23-8-2007 which reads as follows:-
“12.1 Section 73 of the Act deals with adjudication of cases of short-levy or non-levy of service tax or service tax short paid or not paid or erroneously refunded. For quick settlement of disputes, this section prescribes that (i) in other cases involving fraud, collusions, willful misstatement and suppressions of facts etc., the dispute could be settled by making payment of the service tax amount specified in the notice along with interest and penalty equal to 25% of service tax amount, within thirty days of issue of show cause notice; (ii) and in any other case the person chargeable to service tax, or to whom service tax has been erroneously refunded, may make payment suo motto along with interest , as applicable, and, consequently no show Cause Notice will be served in respect of the amount so paid.”

Respondent Contention:- The respondent would draw our attention to Para 9.1 of Master Circular No. 97/8/2007-S.T., dated 23-8-2007, to submit that penalty under Section 76 is imposable and in this case has been rightly imposed.

As regards submissions of ld. AR, Para 9.1 of Master Circular No. 97/8/2007-S.T, dated 23-8-2007 relied upon by ld. AR, it is reproduced as follows:
“9.1 Delay in payment of service tax, including a part thereof, attracts simple interest in terms of section 75 of the Act. The rate of interest is as prescribed from time to time, in accordance with this section. At present, the rate of interest is 13% per annum (notification No. 26/2004-ST, dated 10-9-2004). Further, failure to pay service tax also attracts a penalty under Section 76 of the Act, which shall not less than Rs.200 every day during which such failure continues or at the rate of 2% of such tax per month, whichever is higher, starting with the first day after the due date till the date of actual payment of the outstanding amount of service tax. However, such penalty would not exceed the service tax payable.”

Reasoning of Judgment:- We have considered the submission from both sides and perused the record, we examined that a combined reading of both the paragraphs would show that even Board has no such intention that Show Cause Notice should be served to the assessee, who pays the Service Tax and interest before service of notice. Under these circumstances, the penalty imposed on the appellant cannot be sustained and is required to be set aside. Accordingly, the appeal is allowed with consequential relief to the appellant by setting aside the penalty imposed under Section 76 of Financial Act, 1994.

Decision:- Appeal allowed with consequential relief.

Comment:- The crux of this case is that as the appellant had paid service tax and interest thereon before the receipt of Show Cause Notice, penalty under section 76 of the Finance Act, 1994 was not imposable on them.

Comments

PJ-Case law-2012/13-1561

Post a Comment

Query