AMIT BAJAJ ADVOCATE

Facts: In this case The assessee was engaged in providing maintenance or repair services. During relevant period though the assessee had collected service tax from service recipients but deposited same with the revenue belatedly along with interest. Besides that it also paid fees for late filing of return. Subsequent thereto, the Assistant Commissioner issued show-cause notice, and on adjudication of same, imposed penalties under sections 76, 77 and 78. The Commissioner (Appeals) upheld said order.

From the records, it is seen that the assessee had discharged the service tax liability along with interest thereon well before the issue of show-cause notice. It had also paid the late fee for the delayed filing of the service tax return. In spite of this, the department has chosen to issue a show-cause notice. [Para 5]

A plain reading of the provisions of section 73(3) makes it abundantly clear that if the assessee has discharged the service tax liability on his own ascertainment or on the basis of ascertainment by the Central Excise officers and inform the Central Excise Officer of payment of such service tax then, no notice under sub-section (1) in respect of the amount so paid shall be served. In the instant case, the assessee discharged the tax liability for the period April to September, 2007 in August 2007 and May 2008. Interest amounting to Rs. 10,049 was paid on 5-5-2008. It had filed the return due on 25-10-2007 by 9-5-2008. It also paid the late fee of Rs. 2000 for the delayed filing of the return as per the instructions of the officer who received the return. The above conduct of the assessee made it abundantly clear that there was no wilful misstatement or suppression of fact on the part of the assessee. Therefore, the provisions of sub-section (3) of section 73 are clearly attracted in the facts of the instant case and issuance of a show-cause notice for demand of service tax and imposition of penalties were not at all warranted. [Para 6]

In view of the above legal provisions, the imposition of penalties under sections 76, 77 and 78 in the instant case was not at all warranted and, therefore, was to be set aside.

1. This appeal is directed against the Order-in-Appeal No: SR/195/NGP/2009 dated 07/09/2009 passed by the Commissioner of Customs & Central Excise (Appeals), Nagpur.

2. Briefly stated the facts of the case are as follows:

2.1 The appellant, K.G.K. Nair, proprietor of M/s. Saraswati Engineering, Gadchandur, Distt. Chandrapur is a small-scale contractor engaged in providing Maintenance and Repair Services and holds Service Tax Registration No. 263/MRS/CND/2003-04. During the period from April to September, 2007 the appellant provided the said services to M/s. Manikgarh Cement, Gadchandur. The value of the taxable service so provided amounted to Rs. 19,11,058/-. The service tax payable thereon amounted to Rs. 1,98,724/-. The appellant collected service tax from the recipient of the service but did not remit the same immediately to the credit of the Revenue. The appellant paid an amount of Rs. 83,820/- towards service tax on 21/08/2007 and paid the balance amount of Rs. 1,14,904/- on 05/05/2008. The appellant also discharged the interest amount of Rs. 10,049/- for the late payment of service tax. The appellant filed the service tax return for the said period on 09/05/2008 after a lapse of about 6 months and was directed to pay the late fee of Rs. 2,000/- for the delayed filing, which was also paid by the appellant.

2.2 The jurisdictional Assistant Commissioner issued a show-cause notice dated 20/10/2008 alleging non-payment of service tax for the said period and also proposing imposition of penalties under Sections 76, 77 and 78 of the Finance Act, 1994. The appellant did not file any reply to the show-cause notice. Therefore, the adjudicating authority passed an ex parte order dated 30/03/2009 wherein he confirmed the service tax amount of Rs. 1,98,724/-, interest on the said amount under Section 75 and imposed an equivalent amount of penalty both under Section 76 and under Section 78 of the Finance Act, 1994 and a further penalty of Rs. 1,000/- under Section 77.

2.3 The appellant-assessee filed an appeal before the Commissioner (Appeals) and submitted before the said authority that they had discharged the service tax liability and interest thereon much before the issue of the show-cause notice and had also filed the service tax return for the relevant period before the issuance of the notice. They also informed that they had also deposited late fee of Rs. 2,000/- for the delayed filing of the return and, therefore, they pleaded that as per the provisions of Section 73 of the Finance Act, 1994, no notice could have been issued against them for demanding service tax and also for imposition of penalties. Therefore, they prayed for setting aside the penalties imposed. However, the learned Commissioner (Appeals) did not consider their pleas and passed the impugned order upholding the confirmation of service tax and imposition of penalties and rejected the appeal completely.

2.4 The appellant is before me against the said order.

3. The learned advocate for the appellant submits that in spite of the submissions made before the lower appellate authority that in view of the provisions of sub-section (3) of Section 73, no notice could have been issued on the appellant and no penalty could have been imposed. The lower appellate authority did not consider this plea and merely confirmed the order of the lower adjudicating authority. When the show-cause notice itself is not maintainable in view of the above provisions of law, the orders of the adjudicating and appellate authorities are bad in law and not sustainable.

4. The learned SDR, on the other hand, reiterates the findings given by the lower authorities. However, he fairly concedes that the appellate authority has not given any finding on the pleas made by the appellant and, therefore, the matter be sent back to the lower appellate authority for reconsideration.

5. I have carefully considered the submissions. From the records it is seen that the appellant had discharged the service tax liability of Rs. 1,98,724/- along with interest thereon well before the issue of show-cause notice. They had also paid the late fee of Rs. 2,000/- for the delayed filing of the service tax return. In spite of this the department has chosen to issue a show-cause notice in October 2008. Sub-section (3) of Section 73 reads as follows:

"(3) Where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the person chargeable with the service tax, or the person to whom such tax refund has erroneously been made, may pay the amount of such service tax, chargeable or erroneously refunded, on the basis of his own ascertainment thereof, or on the basis of tax ascertained by a Central Excise Officer before service of notice on him under sub-section (1) in respect of such service tax, and inform the Central Excise Officer of such payment in writing, who, on receipt of such information shall not serve any notice under sub-section (1) in respect of the amount so paid:

Provided that the Central Excise Officer may determine the amount of short payment of service tax or erroneously refunded service tax, if any, which in his opinion has not been paid by such person and, then, the Central Excise Officer shall proceed to recover such amount in the manner specified in this section, and the period of "one year" referred to in sub-section (1) shall be counted from the date of receipt of such information of payment.

Explanation. - (1): For the removal of doubts, it is hereby declared that the interest under section 75 shall be payable on the amount paid by the person under this subsection and also on the amount of short payment of service tax or erroneously refunded service tax, if any, as may be determined by the Central Excise Officer, but for this sub-section.

Explanation - (2) For the removal of doubts, it is hereby declared that no penalty under any of the provisions of this Act or the rules made thereunder shall be imposed in respect of payment of service-tax under this sub-section and interest thereon."

6. A plain reading of the above provisions makes it abundantly clear that if the assessee has discharged the service tax liability on his own ascertainment or on the basis of ascertainment by the Central Excise officers and inform the Central Excise officer of payment of such service tax then, no notice under sub-section (1) in respect of the amount so paid shall be served. In the instant case, the assessee discharged the tax liability for the period April to September, 2007 in August 2007 and May 2008. Interest amounting to Rs. 10,049/- was paid on 05/05/2008. They had filed the return due on 25/10/2007 by 09/05/2008. They also paid the late fee of Rs. 2,000/- for the delayed filing of the return as per the instructions of the officer who received the return. The above conduct of the assessee make it abundantly clear that there was no wilful misstatement or suppression of fact on the part of the assessee. Therefore, the provisions of sub-section (3) of Section 73 is clearly attracted in the facts of the case and issuance of a show-cause notice for demand of service tax and imposition of penalties was not at all warranted.

7. Learned advocate is only challenging the imposition of penalties and not any other amount paid by his client. In view of the above legal provisions I hold that the imposition of penalties under Sections 76, 77 and 78 in this case was not at all warranted and therefore, I set aside the same. Thus the appeal is allowed with consequential relief, if any.