Order Date: 1 September 2022

Facts-

• The Appellant, Rajasthan Guest House is registered under the category of “Restaurant” and “Accommodation in Guest House” service and is engaged in running a small guest house.
•  During the course of scrutiny of the records it was noticed that the Appellant has short paid the service tax and thus a Show Cause Notice was issued proposing recovery of the said amount along with interest and penalties under sections 77(1) (a), 77(2) and 78 of the Finance Act, 1994.
• The Appellant had agreed and paid the above amount of Service tax before the issuance of the Show Cause Notice and thus had requested the department to drop the penalty proceedings as there was no mala fide intent to evade payment of service tax.
• The Adjudicating Authority as well as the first appellate authority have confirmed the demand of penalty on the ground of suppression and thus the present appeal is filed by the appellant.

Issue-

• Whether the authority has rightly imposed the penalty under Section 78 of the Finance Act, 1994?

Order-

• The Tribunal observed that the issue is no more resintegra in view of the decision of the Tribunal in the case of Bhoruka Aluminium Limited Vs. CCEx. &S.Tax, Mysore reported in [2017 (51)STR 418 wherein it was held that Section 73(3) of the Finance Act, in unambiguous terms states that when an assessee has paid Service tax either on his own or on the basis of the officer’s ascertainment and informs the officer of such payment, then the said Section does not give any power to such officer to issue a show cause notice in respect of the tax so paid and such issuance of show cause notice is sans force of law.
• The Tribunal observed that Section 73(3) is very clear as it says that if tax is paid along with interest before issuance of the show cause notice, then in that case, show cause notice shall not be issued. In this case, the contention of the appellant that he bona fidely believed that he is not liable to pay service tax but during the audit, the audit party informed him that he is liable to pay service tax, then he immediately paid the entire service tax along with interest. Except for mere allegation of suppression, the Department did not bring any material on record to prove that there was suppression and concealment of facts to evade payment of tax. 
• The Tribunal held that the imposition of penalty under Section 78 of the Act is not justified and bad in law. Moreover, in the impugned order, the learned Commissioner (Appeals) has not recorded any finding on suppression of facts by the appellant with an intention to evade tax.
• Hence the impugned order is set aside and the appeal filed by the appellant is allowed with consequential benefit.