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PJ/CASE LAW/2015-16/3025

Whether penalty is imposable, when assessee has discharged their Service Tax and interest liability on his own ascertainment?

Case: COMMISSIONER OF CENTRAL EXCISE, NAGPUR Vs MURLI INDUSTRIES LTD.

Citation: 2015 (39) S.T.R. 1033 (Tri. - Mumbai)

Brief Facts:  The Service Tax liability has been fastened upon the appellant on the ground that they have not discharged the Service Tax liability under reverse charge mechanism for an amount paid by them under the category of ‘Banking and other Financial Services’ and have raised funds through External Commercial Borrowings (ECB).
Learned DR submits that their appeal is against the imposition of penalty under Section 78 of the Finance Act, 1994, and non-imposition of penalty under Section 76 of the same Act.
Learned Counsel would submit that on being pointed out by Revenue, the assessee has discharged the entire Service Tax liability and interest thereof before the issue of show cause notice. This fact has not been disputed in the impugned orders.

Reasoning of Judgement: If the assessee discharges the Service Tax and interest liability on his own ascertainment or on being pointed out by the Central Excise Officers, no show cause notice is required to be issued as per provisions of Section 73(3) of the Finance Act, 1994. We also find that the appellant could have entertained a bona fide belief that such funds which are raised under ECB and amount paid by them to the foreign bank, may not be covered under the tax net. This is a fit case for invoking provisions of Section 80 of the Finance Act, 1994. They set aside the penalty imposed by the lower authorities by invoking the provisions of Section 80 of the Finance Act, 1994. Since we invoked the provisions of Section 80 of the Finance Act, 1994, and hold that Revenue’s appeal seeking imposition of penalty under Section 76 of Finance Act, 1994, also does not merit any consideration.


Decision: Assessee’s Appeal Allowed

Comment: In this case the assessee has discharged their Service Tax and interest liability on his own ascertainment or on being pointed out by the Central Excise Officers and therefore the Tribunal held that penalty shall not be imposed.
 
 
 
 
 
 
 

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