2023 (3) TMI 442 - AT - Service Tax

Levy of penalties u/s 77 and 78 of the Finance Act, 1994 - delayed payment of Service Tax as well as non-payment of service tax - delay in filing returns - suppression of facts or not - HELD THAT:- The provision of Sub-section (3) of Section 73 of the Finance Act, 1994 provides that no Show Cause Notice is to be issued when the assessee has paid the Service Tax along with interest. The Learned Counsel for the appellant has submitted that the delay in paying the Service Tax was due to financial hardships. On being pointed out by the internal audit group, the appellant has immediately paid the Service Tax along with interest. It is also to be stated that the appellant has accounted the amounts received by them as well as the details of transactions. To such extent, there has been no suppression of facts on their part.

The words ‘suppression of facts’ are preceded by the word ‘fraud’ and therefore, there should be some positive act on the part of the appellant so as to evade payment of Service Tax, to saddle the burden of intention to evade payment of Service Tax. In the present case, there are no suppression of facts on the part of the appellant. Delay in payment of Service Tax due to financial hardships cannot always be considered to be ‘suppression of facts.’ - An assessee who has suppressed figures in their account or issued parallel invoices so as to evade the payment of tax will not be covered under sub-section (3) of Section 73 of the Finance Act, 1994. Here, apart from a vague allegation, there is no evidence that the appellant has suppressed facts with the intent to evade payment of tax.

In the case of COMMISSIONER OF SERVICE TAX, SERVICE TAX COMMISSIONERATE VERSUS VEE AAR SECURE [2011 (1) TMI 716 - KARNATAKA HIGH COURT], it was held that when upon being pointed out, the assessee got themselves registered with the Service Tax Department and paid the entire Service Tax with interest, the penalty imposed was unwarranted.

The Learned Authorized Representative for the Department has relied upon the decision in the case of M/S. NEBULA COMPUTERS PVT. LTD. VERSUS COMMISSIONER OF GST & CENTRAL EXCISE, CHENNAI [2023 (2) TMI 897 - CESTAT CHENNAI]. In the said case, the Tribunal has refused to take note of the plea raised by the appellant therein that the tax was not paid due to financial hardship, which is a view taken on the facts and circumstances of the said case that undue sympathy is not required. The said decision is therefore distinguishable on facts.

The penalties imposed are unwarranted and require to be set aside - The impugned order is modified to the extent of setting aside the penalties imposed under Sections 77 and 78 of the Finance Act, 1994 - Appeal allowed in part.