ST - Merely because tax was collected but not paid, ingredient available u/s 78 does not get attracted - appellant had clear intention to pay tax as correct value was declared in ST-3: CESTAT
By TIOL News Service
MUMBAI, MAY 02, 2018: THE appellants are engaged in providing software maintenance and repair services and information technology software service. During the period April 2011 to August 2012, they short paid the Service Tax amount of Rs.2,61,64,235/-.
The appellant paid the entire unpaid amount along with interest before issuance of show-cause notice and intimated to the Department for their option available under Section 73(3) vide their letter dated 21.09.2012.
Nonetheless, SCN dated 21.02.2013 was issued and the same culminated into the impugned order whereby entire demand of show-cause notice was confirmed and the amount of Service Tax paid along with interest was appropriated and a penalty of 50% of the Service Tax amount i.e. Rs.1,30,82,118/- was imposed u/s 78 along with penalty of Rs.5,000/- u/s Section 77 of the Finance Act, 1994.
The appellant is before the CESTAT and contests ONLY the penalty imposed under Section 78.
Apart from reiterating the factum of payment of the service tax amount along with interest, it is submitted that entire value of the services have been declared in the ST-3 return for the relevant period and, therefore, there is no suppression of fact or any malafide with intention to evade Service Tax. And, therefore, their case is clearly covered under Section 73(3) of the Finance Act, 1994, the appellant pleaded.
The AR pointed out that the appellant had collected the Service Tax from their clients and did not deposit the same with the Government, hence there was clear malafide on the part of the appellant and, therefore, penalty was rightly imposed.
The Bench inter alia observed –
++ From the facts available on record and submissions by both sides, we find that though the appellant have not paid the Service Tax in time but they have correctly declared the value of the service provided including those values which escaped from payment of Service Tax. Therefore, when the correct value was declared, intention to evade Service Tax is not established against the appellant . Accordingly, the ingredients available for imposing penalty under Section 78 do not exist. If this be so the appellant was clearly entitled for non-issuance of show-cause notice by the Revenue in terms of Section 73(3) of the Finance Act, 1994 …
++ The appellant have exercised the option available under Section 73(3) by making an application dated 21.09.2012 for settling their case under Section 73. Therefore, there cannot be a better case of Section 73(3), in view of the facts of the present case. Therefore, the Revenue was not supposed to issue any show-cause notice. Consequently there was no question of any penalty which can be imposed in absence of show-cause notice.
To the submission by the AR that the appellant had collected the Service Tax but did not pay to the Government and this proved malafide on the part of the appellant, the CESTAT noted -
"…we find that there is a difference in a case where the appellant has intention to evade Service Tax and collected the Service Tax but did not discharge the liability. In the present case, the appellant though collected the Service Tax from their client but they have clear intention to pay the Service Tax as correct value declared in the ST-3 return. Therefore, merely because the Service Tax was collected the ingredient available under Section 78 does not get attracted…"
Concluding that immunity under Section 73(3) of the Finance Act, 1994 is available to the appellant, the penalty imposed u/s 78 was set aside.
The appeal was allowed in the above terms.
(See 2018-TIOL-1393-CESTAT-MUM)
