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Shubh Labh Reality Limited Vs. Commissioner, Central Goods and Service Tax and Central Excise - (Customs, Excise and Service Tax Appellate Tribunal) (30 Jun 2021)

When non-payment of tax is not due to fraud, collusion, wilful misstatement or suppression of facts, penalty cannot be imposed


Service Tax

The Appellant is engaged in providing construction of residential complex services. During the course of audit of the records, for the period 2012-2013 to 2015-2016, the Department noticed that, the Appellant has failed to pay the interest liability of Rs. 88,754 on the delayed payment of service tax as required under Section 75 of the Finance Act, 1994 alleging that the service tax liability arise on the date of the sale deed of the constructed property. Department also observed that, the Appellant is providing said taxable services but without payment of service tax despite that the constructed property were sold after obtaining completion certificate from the Architect. A Show Cause Notice served upon the Appellant proposing the recovery of service tax of Rs. 3641231 and the recovery of interest of Rs. 88,754 being not paid by the Appellant along with the interest at proportionate rate and the appropriate penalties. The said proposal was confirmed by Commissioner (Appeals) vide the order.

The completion certificate dated 22nd February, 2017 as was issued by Gram Panchayat was absolutely valid, at the time the Show Cause Notice was issued to the Appellant. Resultantly, the Show Cause Notice itself is void. The burden to prove the allegations was upon the Department. Accordingly, there is no late payment of service tax by the Appellant as is alleged by the Department. Imposition of interest on the ground of late payment is not sustainable.

It is on record that, the Appellant was discharging the service tax liability as and when the instalment toward the sale consideration of the property used to be received by the Appellant. No mala fide intent can be attributed to such an assessee who otherwise has been regularly discharging the tax liability. Mere evasion of tax does not invite penalties unless and until there is the evidence of some positive act on part of the appellant to show his intend to not to pay the tax. The said evidence is miserably missing in the present case. The proviso to Section 73 of Finance Act could not have been invoked by the Department in the present case.

This Tribunal in the case of CCE Vs. Renee Telepoint has held that, when non-payment of tax is not due to fraud, collusion, wilful misstatement or suppression of facts penalty cannot be imposed under Section 78 of the Finance Act. Nor the Department could invoke the extended period of limitation. In present case, Show Cause Notice of the year 2017 raising the demand from the year 2012 onwards is, therefore held barred by time. The findings of the Commissioner (Appeals) are set aside. Appeal allowed.


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