The Customs, Excises, and Service Taxes Appellate Tribunal (CESTAT) held that if a tax is paid along with interest before the issuance of show-cause notice, then, in that case, show-cause notice shall not be issued.
Facts of the case:
The appellant, YCH Logistics (India) Pvt. Ltd. is engaged in providing “Clearing & Forwarding Agency’s Service”, “Storage & Warehousing Service” and “Cargo Handling Service”. During the course of verification of records of the assessee by the Internal Audit Party of the Service Tax Commissionerate, Bangalore, it was noticed that the assessee had received services from abroad, viz. Management service/advise Data Communication, use of Trademark, etc. The services imported by the assessee are taxable services and are chargeable to Service Tax but they had not paid the Service Tax applicable on the same. The assessee was liable to pay the Service Tax on import of such services as a recipient as provided under Section 66A of the Finance Act, 1994 read with Rule 2(1)(d)(iv) of Service Tax Rules, 1994.
Interpretation of law:
On being pointed out by the Audit Party, the assessee accepted the contention of the audit and paid the Service Tax along with interest.
The department contended that the appellant has deliberately and intentionally suppressed the material facts and the same was detected during the audit, issued the show-cause notice dated 19/04/2011 and after following the due process, the original authority confirmed the demand along with interest and also appropriated the amount of service tax and interest paid by the appellant before the issue of show-cause notice.
The tribunal consisting of a Judicial Member, S.S. Garg, and an Accountant Member, P. Anjani Kumar held that the imposition of penalty under Section 77 & 78 is not justified and bad in law on the ground that if a tax is paid along with interest before the issuance of show-cause notice, then, in that case, show-cause notice shall not be issued.
“We find that the contention of the appellant that they bona widely believed that they are not liable to pay service tax but when the audit party raised the objection that they are liable to pay service tax, then they immediately paid the service tax along with interest which is admitted in the impugned order, is justified,” the tribunal observed.