The Kolkata Bench of Customs, Excise and Service Tax (CESTAT) quashed the Service Tax Penalty as the Department did not bring any material to prove suppression of facts to evade tax.
The demand was confirmed by the lower authority as proposed in the SCN. The Respondent, M/s Asian Hotel (East) Limited filed an appeal before the first appellate authority who allowed the appeal of the Respondent to the extent of dropping the demand of Rs.65,82,774/- under Rule 6 of the CCR, 2004 and confirmed the demand of Rs.10,61,419/- along with interest and penalty with an option to pay reduced penalty @ 25% as laid down in proviso to Section 78 of the Finance Act, 1994.
“As regards imposition of penalty on the amounts of Service Tax already paid by the Respondent during the course of audit before issuance of SCN, both the lower authorities have erred in confirming the penalty as it is a settled principle that when tax is paid along with interest before issuance of SCN (other than cases of suppression or willful mis-statement), the Department cannot issue SCN in terms of section 73(3) of the Finance Act, 1994,” the coram of Judicial Member, P. K. Choudhary and Technical Member, Raju said.
The Tribunal noted that except 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. Consequently, in my opinion, 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.
“The Departmental appeal is dismissed in entirety and the order of the first appellate authority is modified to the extent of deleting the imposition of penalty,” the CESTAT said.
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