whether the appellant is liable for penalty when he had failed to discharge his service tax liability correctly but later on paid the same with interest when notified?

PJ/CASE LAW/2014-15/2465

Case:-M/s A K GANDHI CARS Vs COMMISSIONER OF CENTRAL EXCISE, NAGPUR

Citation:- 2014-TIOL-2213-CESTAT-MUM

Brief facts:- The brief facts of the case are that the appellant is engaged in providing various services. They are having separate units located in separate places. As per the Companies Act, they have to maintain consolidated records of the financial transactions as well as final accounts and on the basis of the financial accounts, they were filing the service tax return and paying service tax accordingly. During the impugned period, an audit took place and it was found that the appellant is not paying service tax as per the amount of taxable service shown in the balance sheet.Therefore, show-cause notice were issued to demand that differential service tax as per the balance sheet shown by the appellant. In reply to the show-cause notice, the appellant produced financial records of separate units to corroborate the actual amount of service tax received, receivable, payable and paid. It is a fact that at that time, the service tax was payable on receipt basis and balance sheet have been prepared on receivable basis. Therefore, after scrutiny of balance sheet of group entity along with the appellant, the Adjudicating Authority came to a conclusion that a sum of Rs. 4,42,073/- is payable as per balance sheet of the appellant as service tax payable, which has been paid by the appellant along with interest but the Adjudicating Authority imposed various penalties under the Finance Act, 1994. On appeal, the same has been confirmed by the Commissioner (Appeals). Aggrieved from the same, appellant is before me seeking immunity against imposition of penalty under Section 80 of the Finance Act, 1994.

Appellant’s contention:- The ld. counsel for the appellant contended that in fact the figure shown in the balance sheet are for service provided not on the basis of service received. In that case, there may be variation and show-cause notice was issued for larger amount of service tax but after reconciliation, the liability came down drastically. As the appellant are paying service tax on the basis of consolidated books of account, it cannot be termed that they have willfully suppressed the fact. Therefore, they are entitled for immunity under Section 80 of the Finance Act, 1994 of imposition of penalty.

Respondant’s contention:- On the other hand, ld. AR submits that as the appellant has admitted their service tax liability and paid the same along with interest, therefore mens rea of the appellant has been proved and the lower authorities have rightly imposed penalty on the appellant.

Reasoning of judgment:-In this case, the show-cause notice was issued to the appellant for larger amount but after reconciliation, the amount came down to Rs. 4,22,703/- Further the figure shown in the balance sheet are on the basis of receivable basis and during the impugned period, service tax required to be paid on receipt basis. Therefore, it cannot be termed in the facts and circumstances of the case, that the appellant was having a malafide intention to suppress true facts to ascertain the service tax liability. Although the appellant has not disputed the service tax liability which have been paid along with interest, it cannot be said that the appellant are having malafide intention. In these circumstances, appellant are entitled for immunity under Section 80 of the Act. Accordingly, the tribunal set aside the penalty imposed on the appellant by giving the benefit of Section 80 of the Finance Act, 1994.

Decision:-The appeal is allowed.

Comment:-where the appellant has paid the interest along with the duty on being pointed out, it cant be said that he had a malafide intention and thus penalty should not be imposed.

Submitted by:-somya jain

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PJ/CASE LAW/2014-15/2465

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