2025-VIL-1971-CESTAT-AHM-ST
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SERVICE TAX CESTAT Cases

Service Tax – Sections 73(1) and 78 of Finance Act, 1994 – Imposition of penalty – Sustainability – During course of audit, department noticed that Appellant did not discharge service tax liability towards Rent-a-Cab service and Legal Consultancy service under reverse charge mechanism – Pursuant to audit objections, Appellant paid applicable service tax along with interest – Deputy Commissioner imposed penalty under Section 78 of the Act by invoking extended period of limitation under proviso to Section 73(1) of the Act – Commissioner (Appeals) upheld penalty imposed under Section 78 of the Act – Whether penalty under Section 78 of the Act can be imposed in respect to service tax discharged by Appellant along with interest prior to issuance of show cause notice – HELD – Alleged short payment of tax had been pointed out during course of audit of records of Appellant. Appellant bonafidely believed that they were not liable to discharge service tax liability on impugned services. Appellant had maintained regular books of accounts and all transactions are recorded in usual manner in ordinary course of business. Appellant had provided all necessary information called for during course of audit and promptly paid service tax along with interest before issuance of show cause notice. Invocation of extended period is not justified in absence of any strong allegation or positive act, pointing towards fraud, collusion, or any willful statement or suppression of facts with intent to evade payment of tax. Since case is being covered by provisions of Section 73(3) of the Act, no penalty can be imposed under Section 78 of the Act. Penalty imposed on Appellant under Section 78 of the Act is unsustainable. Impugned order deserves to be set aside – Appeal allowed
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