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Recently, Honble Karnataka High Court in the matter of K. Madhav Kamath Brother & Co. v. Asst. Comm. of Central Excise, pronounced that
even if service tax is paid prior to Show Cause Notice, still the penalty shall be leviable u/s 76/78, 77 of Finance Act94.
Brief facts of the case:
The matter pertains to the period Jan06 to Oct06. The department issued SCN for non-filing of return& non-payment of service tax along with
the levy of penalty on the same(within the SCN itself) u/s 76/78 & 77 of Finance Act94
However, the assessee deposited the service tax liability before issuance of SCN.
The assessee contended that since there wasnt any intention to evade service tax, and non-filing of returns/non-payment of tax was merely
bonafide mistake, hence penalty couldnt be levied.
On appeal being filed before CESTAT-Bnglr,the tribunal rejected the plea of assessee and upheld the levy of penalty. Subsequently, appeal was filed
before High Court.
The High Court also held that even if service tax is paid prior to issuance of SCN, it doesnt preclude from levy of penalty u/s 76/78 & 77 of
ibid.
Comment :
The aforesaid judicial pronouncement pertains to Jan06 to Oct06, however, from 8th May10, explanation 2 to section 73(3) was inserted to grant
relief from penalty, but that too in case both(i.e. service tax as well as interest) were paid before issuance of SCN.
Therefore, it would be interesting to see if department can take advantage of the the said judgement for levying penalty in cases post May10
wherein service tax was paid before issuance of SCN but interest wasnt deposited?
Download Full Text of the Judgment
Read Other Articles from CA Sumit Grover
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