By TIOL News Service

MUMBAI, APR 15, 2014: THE appellant is a co-operative bank and are registered as provider of Banking and Financial Services and paying appropriate tax and also filing statutory returns.

During audit it was found that there was some short payment of service tax. The same was paid immediately along with interest. Subsequently, show-cause notice was issued demanding service tax of Rs.17,52,635/- along with interest and proposing imposition of penalty.

On appeal filed by the appellant, the Commissioner (Appeals) confirmed the demand to the extent of Rs.6,29,030/- which is in respect of the discrepancy pointed out by the audit but upheld penalty. The submissions made that there is no intention to evade payment of tax; that discrepancy pointed out during audit was paid immediately with interest; in view of s.80 no penalty is imposable was not heeded to by the lower appellate authority.

So, the bank is before the CESTAT and seeks waiver of pre-deposit of penalty.

The Bench observed that the appellant had already paid the amount of tax with interest and, therefore, waived the pre-deposit of penalty for hearing of the appeal.

And further noted that the appellants are only challenging the penalty imposed under sections 76, 77 & 78 of the FA, 1994.

After extracting section 80 of the FA, 1994, the Bench held -

"6. From the records, we find that the appellants are paying service tax regularly as provider of banking and financial services. It was only during the audit, it was found certain discrepancy in respect of service tax. The service tax immediately paid along with interest. Thereafter, show-cause notice was issued. In these circumstances, we find that there is no intention on the part of the appellants to evade payment of tax and appellants were under the bonafide belief that the appellants were paying appropriate tax. It was only during the audit, certain discrepancy was found. In view of this, we find that the appellants are not liable for any penalty under sec. 76, 77 & 78 of the Finance Act as per provisions of sec. 80 of the Finance Act. Hence, penalty imposed under the impugned order is set aside. The appeal is allowed as indicated above."

The appeal was allowed.

Now…for the Revenue appeal!

(See 2014-TIOL-565-CESTAT-MUM)