2019 (3) TMI 420 – CESTAT MUMBAI – TMI – Imposition of penalty u/s 78 of FA – service tax along with interest paid on being pointed out – suppression of facts or not – Held that:- The Revenue has failed to bring any evidence to show that the appellant had in fact indulged into the activities of fraud, collusion, willful mis-statement, suppression etc. with intent to evade payment of service tax. On the contrary it is admitted fact that the service tax liability is not disputed by the Appellant and the same has been discharged with applicable interest, for delayed payment, much more before the initiation of proceedings.
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Mens rea has to be proved for invoking the extended period of limitation and also for imposing penalty under Section 78 of the Finance Act, 1994. Mere inaction to declare what was supposed to be declare d under the law does not lead to suppression of facts. Similarly, mere non-payment of short- payment of duties or taxes cannot be construed as with an intent to ev
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Appeal is the imposition of penalty u/s. 78 of the Finance Act, 1994. 2. The appellants are engaged in activities of consignment business and trading business as a consignment agent and trader of products of M/s. Sun Pharmaceutical Industries and their group companies. The dispute is the availment of ineligible Cenvat Credit by the Appellant of ₹ 13,85,751/ – during the period from September, 2011 to February, 2012. According to the department, the discrepancy was discovered during the process of EA 2000 audit and it is an admitted fact that on being pointed out by the department, the appellant has paid the entire Service Tax amount of ₹ 13,85,751/ – with interest of ₹ 1,04,876/ – immediately. But despite that the department issued show cause notice to the appellant and the adjudicating authority confirmed the demand of service tax liability of ₹ 13,85,751/ – alongwith interest and penalty. 3. I have heard ld. counsel for the appellant and ld. Authorised Represe
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service tax. He also submitted that the question of fraud, willful mis – statement or suppression of facts does not arise since immediately upon pointing out the shortfall by the department, the appellant paid the entire amount with interest without even waiting for the show cause notice and that they have been following all norms and have been filing Service Tax Returns in form ST-3 regularly. According to him, the short payment of service tax occurred due to the inadvertence of the clerk who was filing the returns for the appellant during the disputed period and there has been no evidence of fraud or suppression. The ld. authorized representative appearing on behalf of revenue reiterated the findings recorded in the impugned order. He also submitted that the discrepancy would not have come to the light but for the detailed verification of the Cenvat register by Audit and that it cannot be considered as a bonafide mistake. The error is deliberate and intentional and, therefore, he pr
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ase falls within section 73(4) and not under section 73(3) ibid. It is settled legal position that if the assessee deposited the service tax liability with interest before the issuance of show cause notice then the provisions of section 73(3) ibid gets attracted. It is true that section 73(4) keeps operation of section 73(3) out of the purview, in cases where the service tax has not been levied, paid, short-levied or short- paid by reason of fraud, collusion, willful mis-statement etc. but nevertheless, the law does not treat all cases of fraud, collusion, willful mis-statement, suppression of facts etc. and on this issue I am getting support from the decision of the Hon ble High Court of Judicature at Hyderabad in the matter of Commissioner of C.Ex., Visakhapatnam vs. Tirupathi Fuels Pvt. Ltd.; 2017(7) GSTL 142 (AP), wherein the Hon ble High Court in a similar matter, where the assessee paid the service tax with interest before the issuance of show cause notice, set aside the penalty
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ns, willful misstatement, suppression of facts, etc., alike. 17. Keeping this in mind, if we go through the order- in-original, it could be found that the respondent- assessee paid the service tax to the extent of ₹ 40,39,751/- along with interest to the tune of ₹ 12,42,633/-. This amount was paid even before the show cause notice, dated 22.04.2010, was issued. It is only in Paragraph 15(iii) and 15(iv) that the adjudicating authority has recorded a finding that the respondent- assessee willfully suppressed the true and correct value of the freight incurred. But, the findings recorded in Paragraph 15 (iii) and 15(iv), in our considered view, are not sufficient to enable the Department to fall back upon sub-section (4) of Section 73, so as to keep the application of Section 73(3) out of the reach of the respondent-assessee. Hence, we do not think that the Commissioner (Appeals) and the CESTAT were wrong in deleting the penalty. Therefore, the appeal is dismissed. 5. The Reve
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ely and not by mere references. The appellant has shown their bona fide by paying the service tax alongwith interest thereon immediately admitting their unintentional lapse. Considering the facts involved, I have come to the conclusion that the authorities below have failed to brought on record any evidence to prove suppression or mala fide intention on the part of the appellant and, therefore, no case has been made out for invoking the provisions of Section 78 ibid. Consequently, in my considered view, this was a fit case for not issuing a show cause notice for recovery of tax as provided for in Section 73(3) ibid. Accordingly, while upholding the tax liability of the appellant with interest which the appellant has already paid, I find that the penalty imposed based on the proceedings initiated is not justifiable. Consequently, I waive the penalty imposed on the appellant and the appeal is allow ed on the above terms. (Pronounced in Court on 21/02/2019) – Case laws – Decisions – Jud
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