Is penalty leviable when service tax along with interest is paid before issuance of Show Cause Notice?

Shriram RPC  Ltd.  vs. CST, Chennai 2014  (35) STR  564 (Tri.  -  Chennai)

 

 

 

FACTS:

On being pointed out by departmental auditor, service tax along with interest was paid. However, Show Cause Notice  was  issued  imposing  penalties.  Since  tax  along with  interest  was  paid  before  issuance  of Show  Cause Notice,  the  appellant  claimed  entitlement  of  benefit  of 73(3) of the  Finance Act,  1994 and also  requested  for benefits of section 80. Relying on the decision in case of CCE & STC, Bangalore  vs. First Flight Couriers 2007 (8) S. T.R.  225 (Kar.) , the revenue denied  benefit of section 73(3) considering the case as one of suppression.

 

HELD:

Section  73(3) of Finance Act,  1994 was issued with an intention to encourage immediate realization of short payment  and  avoid  unnecessary  litigations.  Karnataka High  Court  in case  of ADECCO  Flexion  Work Force Solutions Ltd. 2012 (26) STR 3 (kar.), had held that unless there  is  any  active  suppression,   section  73(3)  should be  applicable  considering  First  Flight  Couriers  (supra) on  a  different  footing   and  not  finding  even  bonafide error or doubt regarding legal provisions, the penalty was set aside.