By TIOL News Service

MUMBAI, APRIL 11, 2017: THE appellant is registered as a provider of ‘Business auxiliary service' and had paid tax for first three quarters of fiscal 2009 but did not pay thereafter.

On being addressed about the deficiency, they did eventually pay the tax dues and interest of Rs.1,00,208/- thereon on various dates between 30th June 2011 and 13th August 2011.

SCN came to be issued on 21 st October 2011 and upon adjudication, penalties were also imposed.

Having failed to get any relief from the Commissioner(A), the appellant is before the CESTAT and submits that they are a technical organisation with little knowledge of tax matters and paid less than the tax due on stipulated dates owing to financial difficulties; that having paid the entire tax and interest before issue of notice, they believed themselves to be secure under the cover of section 73 (3) of FA, 1994.

The AR relied upon the decisions in Mohtamaan Industries - 2015-TIOL-3043-CESTAT-MUM and IWI Crogenic Vaporization System (India) Pvt. Ltd - 2016-TIOL-350-HC-AHM-ST, both of which held that penalty should be visited on assessees who collect tax and do not deposit with the Government.

The Bench observed -

"6. The crucial question here is whether the ingredients for resort to proviso to Section 73 (1) of Finance Act, 1994 are present to obviate the contention that section 73 (3) of Finance Act, 1994 should have been resorted to for closing the matter. It is an admitted fact that the service tax authorities did commence correspondence with the appellant for payment of remaining dues only following the admission in the service tax returns that the said amount was outstanding. In these circumstances, there can be no greater claim to candidness than that demonstrated by appellant and there is no justification for alleging, or finding, that they had suppressed or misdeclared any relevant material . With such admission of outstandings, intent to evade tax is also an allegation that would not sustain. Therein lies the distinction from the circumstances in re M/s IWICrogenic Vaporization System (India) Pvt Ltd.

7. The ingredients for invoking the extended period, and thus also penalty under Section 78 of Finance Act, 1994, are clearly absent. This is a fit case of closure of the proceedings under Section 73 (3) of Finance Act, 1994 without any of the penalties, as tax and interest had been paid on ascertainment and communication from service tax authorities."

In fine, the appeal was partly allowed by setting aside the penalty imposed u/s 78 of the FA, 1994.

(See 2017-TIOL-1200-CESTAT-MUM)