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October 2014

2014 (35) STR 564 (Tri. – Chennai) Shriram RPC Ltd. vs. Commissioner of Service Tax, Chennai

By Puloma Dalal, Jayesh Gogri, Mandar Telang Chartered Accountants
Reading Time 1 mins
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Is penalty leviable when service tax along with interest is paid before issuance of Show Cause Notice? Held, No.

Facts:
On being pointed out by departmental auditor, service tax along with interest was paid. However, Show Cause Notice was issued imposing penalties. Since tax along with interest was paid before issuance of Show Cause Notice, the appellant claimed entitlement of benefit of 73(3) of the Finance Act, 1994 and also requested for benefits of section 80. Relying on the decision in case of CCE & STC, Bangalore vs. First Flight Couriers 2007 (8) S.T.R. 225 (Kar.), the revenue denied benefit of section 73(3) considering the case as one of suppression.

Held:
Section 73(3) of Finance Act, 1994 was issued with an intention to encourage immediate realisation of short payment and avoid unnecessary litigations. Karnataka High Court in case of ADECCO Flexione Work Force Solutions Ltd. 2012 (26) STR 3 (kar.), had held that unless there is any active suppression, section 73(3) should be applicable considering First Flight Couriers (supra) on a different footing and not finding even bonafide error or doubt regarding legal provisions, the penalty was set aside.

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