Discharging of Service tax liability with interest before issuance of show-cause notice, then no show-cause notice can be issued for imposition of penalties

If assessee has discharged entire service tax liability with interest before issuance of show-cause notice, then, as per section 73(3), no show-cause notice can be issued for imposition of penalties

[2013] 35 taxmann.com 656 (Ahmedabad - CESTAT)

CESTAT, AHMEDABAD BENCH

Amin Equipments (P.) Ltd.

v.

Commissioner of Service Tax, Ahmedabad*

M.V. RAVINDRAN, JUDICIAL MEMBER

ORDER NO. A/10387/WZB/AHD/2013
APPEAL NO. ST/586 OF 2011

FEBRUARY  11, 2013 

Section 73 of the Finance Act, 1994 - Recovery of service tax not levied or paid or short-levied or short-paid or erroneously refunded - Payment on own ascertainment - Assessee paid service tax, along with interest, prior to issuance of show-cause notice - Department issued a show-cause notice seeking levy of penalty - HELD : Though assessee had not paid differential service tax liability during material period, he had paid it on being pointed out by audit party and before issuance of show-cause notice - Since assessee had discharged entire service tax liability before issuance of show-cause notice, it was a fit case for invocation of provisions of section 73(3), which mandates non-issuance of show-cause notice for imposition of penalties - Hence, penalty could not be levied [Para 8] [In favour of assessee]

EDITOR'S NOTE

The principal issue was non-adjustment of payment of Rs. 39,028, which was factually paid twice over. In cases where assessee has paid service tax along with interest prior to issuance of SCN, the only recourse available to department to seek payment of penalty, is to invoke provisions of section 78 alleging suppression of facts. Under present law, notice can be issued in such cases only if the details of the transaction were not available in specified records. It is high time that CBEC issues a circular bringing this position of law to the notice of officials so that notices are issued only in aforesaid cases and avoidable litigation is avoided.

CASE REVIEW

U.B. Engg. Ltd. v. CCE [2009] 23 STT 194 (Ahd. - CESTAT) (para 8), CCE v. Hazi Abdul Razzaque [2006] 5 STT 307 (Kol. - CESTAT) (para 8) and CCE v. Rita Dyeing & Printing Mills (P.) Ltd. [2012] 25 taxmann.com 336 (Guj.) (para 8) relied on.

CASES REFERRED TO

U.B. Engg. Ltd. v. CCE [2009] 23 STT 194 (Ahd.-CESTAT) (para 3), CCE v. Hazi Abdul Razzaque [2006] 5 STT 307 (Kol.-CESTAT) (para 3) and CCE v. Rita Dyeing & Printing Mills (P.) Ltd. [2012] 25 taxmann.com 336 (Guj.).

Ankit Talsania for the Appellant. K. Sivakumar for the Respondent.

ORDER

1. This appeal is directed against order-in-appeal No.306/2010(STC)/MM/Commr.(A)/Ahd, dt.23.09.10.

2. The relevant facts that arise for consideration are the appellant herein is providing output service under the category of maintenance and repair services on which tax liability is discharged. During the course of audit of the records maintained by the assessee, it was noticed that the assessee-appellant had not discharged correct service tax liability. Subsequently show-cause notice dated 22.11.08 was issued demanding the service tax liability, interest thereof and for imposition of penalties. The appellant replied to the show-cause notice and submitted that the entire amount of the service tax liability stands deposited before the issuance of show-cause notice along with the interest and hence no penalty should be imposed. The adjudicating authority confirmed the demands raised along with interest and also imposed penalties. Appellant preferred an appeal before the first appellate authority only on the ground that the service tax liability has been confirmed on the amount of Rs.39,028/- which has been adjusted by the appellant as the same was paid twice. The appellants during the personal hearing produced some challans along with the copy of the returns to prove that point, which was not accepted by the first appellate authority and the first appellate authority has upheld the order in original that confirmed the 'demands and imposed the penalties.

3. Ld. chartered accountant appearing on behalf of the appellant would submit, that the amount has been discharged is undisputed. It is his submission that both the lower authorities did not appreciate the facts of the case and has not accepted the discharge of service tax liability twice by the appellant to an amount of Rs.39,028/-. It is his submission that the amount of the service tax liability was paid before the issuance of show-cause notice is also not disputed and hence there should not have been any show-cause notice under provisions of Section 73(3) for which proposition he relies upon the decision of the Tribunal in the case of Bank of Rajasthan Ltd. 2010 (SR2) GJX-0611 - CESTAT, U.B. Engg. Ltd. v. CCE [2009] 23 STT 194 (Ahd. - CESTAT, CCE v. Hazi Abdul Razaque [2006] 5 STT 307 (Kol. - CESTAT), and also the judgment of Hon'ble High Court of Gujarat in the case ofCCE v. Rita Dyeing & Printing Mills (P.) Ltd. [2012] 25 taxmann.com 336. It is his submission that report may be called for from the lower authorities.

4. Ld. Additional Commissioner. (A.R.) would submit that clarification is received from the office of the Assistant Commissioner, Service Tax (Jurisdictional Assistant Commissioner) and who vide letter dated 29.2.12 has stated that an amount of Rs.39,028/- was paid twice over. He submits that the appellant is liable for penalty as he has not discharged the service tax liability pointed out by the Revenue authorities.

5. I have considered the submissions made by both sides and perused the records.

6. It is undisputed that the appellant had not paid the differential service tax liability during the material period in question but has paid the same on being pointed out by the audit party and claimed that they have paid the entire service tax liability before the issuance of show-cause notice.

7. On perusal of the records I find that the appellant has paid the entire amount of service tax liability except for the disputed amount which is charged and recovered from the appellant under the provisions of Section 73(1) of the Finance Act, 1994. On the perusal of the receipt of the clarification from the JACI find that the appellant had also discharged this liability before the issuance of show-cause notice.

8. In my view, the appellant having discharged the entire service tax liability before the issuance of show cause notice has correctly sought the invocation of the provisions of Section 73(3) of the Finance Act, 1994 which talks about non-issuance of show-cause notice for imposition of penalties. I find that the appellant was correct in bringing to my notice that the judgments of the Tribunal (as cited hereinabove) will squarely cover the issue in his favour as also the judgment of the Hon'ble High Court of Gujarat in the case of Rita Dyeing & Printing Mills (P.) Ltd. (supra).

9. In view of the foregoing, the entire demand of Rs. 39,028/- is set aside as already paid twice and the penalties imposed under Section 73(3) of the Finance Act, 1994 are also set aside by reading the provisions of Section 73(3) of the Finance Act, 1994.

10. The appeal is allowed and the impugned order is set aside.