KBN Enterprises Vs. Commissioner of Central Tax and Central Excise, Belgaum - (Customs, Excise and Service Tax Appellate Tribunal) (20 Sep 2018)

If the Assessee pays tax with interest, no notice shall be served

MANU/CB/0059/2018

Service Tax

The Appellants are engaged in providing services under the category of "mining of mineral service". The Joint Commissioner of Service Tax issued a show-cause notice alleging that during the audit of the Assessee's record on reconciling the income shown in ST-3 returns and tax paid thereof with service tax liability as per the income shown in Trial Balance for the year 2014-15, it was found that, service tax paid was lower than the service tax liability on the income reflected in the Trial Balance, resulting in short-payment of service tax. Further, it was noticed that, the Assessee had failed to file ST-3 returns for the period October 2014 to March 2015.

After following the due process, the original authority confirmed the demand of Rs. 24,71,701 under proviso to Section 73(1) of the Finance Act, 1994 and also appropriated the said amount paid by the Assessee along with interest of Rs. 98,733/- and imposed equal penalty under Section 78 (1) of the Act, 1994. Aggrieved by the said order, Appellant filed appeal before the Commissioner (A), who rejected the appeal. Hence, the present appeal.

It is a settled law that, when service tax is paid with interest before issuance of show-cause notice and the fact of payment is intimated to the Central Excise Officers, the proceedings should be deemed to have been concluded and the Revenue was not required to issue any show-cause notice and Section 73(3) of the Act, acts as a bar against issuance of show-cause notice in terms of Section 73(1) of the Act.

Karnataka High Court in the case of CCE vs. Adecco Flexione Workforce Solutions Ltd. held that, if the assessee pays the tax with interest, no notice shall be served. Further, in the case of CST, Bangalore vs. Master Kleen, it has been held by the Hon'ble High Court of Karnataka that, when the service tax and interest are paid, show-cause notice shall not be issued in terms of Section 73(3) of the Act, 1994.

The service tax liability was shown in the books of accounts but it was not paid on account of the fact that they could not get the service tax collected from their clients. Further, there is no suppression of facts because all the transactions are reflected in the books of accounts and the audit party detected these transactions from their records only. Further, in view of the decision rendered in the case of Garodia Special Steels Ltd. and Midnapore Tyre Retreading Factory, there is no suppression on the part of the Appellant to evade payment of service tax. Further, when the service tax is paid along with interest before issuance of show-cause notice, then the Revenue should not have issued the show-cause notice as per Section 73(3) of the Act. The Appellant's case is squarely covered by the decision of the Hon'ble Karnataka High Court in the case of Adecco Flexicone Workforce Solutions Ltd. and Master Kleen. Impugned order is set aside.

Relevant : CCE vs. Adecco Flexione Workforce Solutions Ltd. reported in MANU/KA/2372/2011 : 2012 (26) STR 3 (Kar.), CST, Bangalore vs. Master Kleen: MANU/KA/2620/2011 : 2012 (25) STR 439 (Kar.)

Tags : SCN PENALTY IMPOSITION