(Per : HONOURABLE MR.JUSTICE V. M. SAHAI) 1. This appeal has been filed on the following proposed substantial question of law:
“Whether the CESTAT was right in invoking the provisions of Section 73(1A) of the Finance Act, 1994 even though these provisions were not applicable to the facts of the case and whether the CESTAT was right in ignoring certain conditions provided for in the provisions of Section 73(1A) of the said Act?”
2. We have heard Mr. Darshan M. Parikh, learned counsel appearing for the appellant in this Tax Appeal. The facts in brief are that M/s. Manan Motors Private Limited, Ahmedabad, (hereinafter referred to as `the assessee' for short), is engaged in providing Services as Authorized Service Station, falling under the category of `service of motor vehicles' and `business auxiliary service'. The assessee has allowed financial institutions like ICICI and HDFC to keep their counters/desks for providing the suitable environment to them to boost up their business. In response the said financial companies were giving them a substantial amount under head `commission/incentive/remuneration, etc. therefore, the assessee was liable to pay service tax on the commission received from the financial institutions under `business auxiliary service'. The assessee had paid the amount of service tax and interest within time whenever it was due for the period between 01.07.2003 and 31.12.2005. The following chart will demonstrate the details of payments made against the service tax and interest liability of the assessee:
3. The Joint Commissioner, Service Tax, Ahmedabad, issued a show cause notice on 22.10.2008 proposing to recover service tax of Rs.7,68,602/- on the value of Rs.86,19,305/- during the period 01.07.2003 to 31.12.2005 under the proviso to section 73(1) of the Finance Act, 1994 (for short `the Act') along with interest, and also proposed to adjust service tax amount of Rs.7,68,602/- and interest amount of Rs.1,16,485/- paid by the assessee against the demand of service tax and interest. The show cause notice also mentioned that the assessee should explain as to why penalty under sections 75A, 76, 77 and 78 of the Act be not imposed.
3. In pursuance of the show cause notice dated 22.10.2008, the Joint Commissioner, Service Tax, passed an order on 12.11.2009 wherein demand of Rs.7,68,602 was confirmed along with interest in terms of section 75 of the Act and penalty of Rs.200/- per day or at the rate of 2% of the Service Tax amount per month under section 76 of the Act was imposed. Penalty of Rs.7,68,602/- was imposed under section 78 of the Act. An option was given to them to pay penalty of 25% if it is paid within thirty days. However, no penalty was imposed under section 75A and 77 of the Act.
4. The assessee challenged the order dated 12.11.2009 passed by Joint Commissioner, Service Tax, by way of appeal before the Commissioner (Appeals), who by his order dated 16.03.2010 rejected the appeal.
5. The assessee thereafter filed an appeal before the CESTAT. The Tribunal by its judgment dated 22.02.2012 has allowed the assessee's appeal by placing reliance on Circular No.137/167/2006-CX dated 03-Oct.- 2007. The Tribunal held that the provisions of section 73(1A) of the Act, will apply in full force as the entire amount of service tax has been paid along with interest, before the issuance of show cause notice. Therefore, the proceedings initiated against the assessee for imposition of penalty in excess of 25% was liable to be set aside.
6. We are in agreement with the view taken by the Tribunal, though Mr.
Darshan M. Parikh, learned counsel for the appellant has vehemently urged that under section 73 read with sub-section (1A) of the Finance Act, once show cause notice has been issued then the assessee is required to make payment of penalty. He has further argued that even before the issuance of show cause notice if the service tax and interest has been deposited by the assessee, still he would require to deposit the penalty as he would have known as to what penalty would be levied on the assessee, therefore, atleast he should have deposited the 25% of the penalty amount within thirty days. We do not agree with the argument of learned counsel for the appellant as the Board's Circular dated 03.10.2007 in paragraph no.3.1 has considered the proviso to section 73 that where a person has paid service tax in full together with interest and penalty under sub-section (1A), the proceedings in respect of such person to whom notices are served under sub-section (1) shall be deemed to be concluded. In the instant case was not contesting the Service Tax liability and had deposited the entire service tax and interest much before the issuance of show cause notice and discharged 25% of the amount of service tax liability, and at that time, neither any penalty was levied by the appellant nor any quantum of penalty was fixed. Therefore, the assessee has not committed any illegality in not depositing any penalty amount.
7. For the aforesaid reasons, the penalty levied against the assessee in excess of 25% under sections 76 and 78 of the Finance Act, 1994, has rightly been set aside by the Tribunal. We do not find any illegality in the order of the Tribunal. The question raised by the assessee in our opinion does not raise any substantial question of law. We do not find any merit in this Tax Appeal. This Tax Appeal is accordingly dismissed.
(V.M. SAHAI, J.) (N.V. ANJARIA, J.) (SN DEVU PPS)