In a ruling in favour of DLF Home Developers, the Chandigarh bench of the Customs, Excise & Service Tax Appellate Tribunal(CESTAT) has held that mere non-registration, non-payment of service tax cannot be a reason to allege suppression and set aside the penalty on Preferential Location Services.
The appellants are providing Business Auxiliary Services, Business Support Services, and Construction of Complex Services Regarding the imposition of penalty on the service tax payable on Preferential Location Services, it was submitted that the appellants have paid the tax of Rs.2,67,45,149/- before the issuance of show-cause notice and therefore, in terms of Section 73, show cause notice ought not to have been issued.
The respondent submitted that the penalty in respect of Preferential Location Services has been correctly imposed as the appellants have not disclosed material facts to the Department and have not paid the applicable service tax.
It was observed that Section 73 (3) provides that the Central Excise Officer shall not serve any notice under sub-Section 1 of Section 73 where the assessee pays the service tax. The only exception to such non-issuance of show-cause notice is provided under sub-Section 4. Sub-Section 4 is attracted when the elements like fraud or collusion or wilful misstatement or suppression of facts or contravention of any of the provisions of this Chapter or the Rules made there under with intent to evade payment of service tax.
A two-member bench of Mr S S Garg, Member (Judicial) and Mr P Anjani Kumar, Member (Technical) viewed that Revenue has not established any such ingredients in the impugned case except for stating that the appellants have suppressed the material facts.
It was held that “Courts and Tribunals have been consistently holding that mere non-obtaining registration, nonpayment of service tax and non-filing of ST-3 Returns cannot be a reason to allege suppression etc. and that a positive act on the part of the assessee with intent to evade payment of tax has to be established.” The extended period is not invocable and hence, the penalty cannot be imposed on the service tax which stands paid before the issuance of show-cause notice.”, the Tribunal held. The CESTAT set aside the penalty and allowed the appeal.
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