Wavier of Penalty u/s 80 allowable in absence of Evidence Establishing Suppression of fact with Intention to Evade Tax: CESTAT [Read Order]

The Kolkata bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that Waiver of Penalty under section 80 of the Finance Act, 1994 allowable in the absence of Evidence  Establishing Suppression of fact with Intention to Evade Tax

The Appellant, M/s Guru Shipping & Clearing Pvt. Ltd. are engaged in providing Cargo Handling Service and is registered under Service Tax. During scrutiny of service tax-related records of the Appellant, it was noticed that during the Financial Year 2009-10, the Appellant has neither paid service tax nor filed service tax returns. A Show Cause Notice dated was issued to the Appellant demanding service tax including Education Cess, total amounting to Rs.96,80,867/-along with interest and penalty.

The Notice was adjudicated vide Order-in-Original dated 27.03.2012, wherein service tax of Rs.1,08,13,836/- was confirmed along with interest and an equal amount of tax was also imposed as a penalty under Section 78 of the Finance Act, 1994.

The Appellant stated that the show cause notice was issued for an amount of Rs.96,80,867/- whereas the adjudicating authority has gone beyond the Notice and confirmed an amount of Rs.1,08,13,836/- which is bad in law and hence the impugned order is to be construed as nonest.

He contended that the Appellants themselves declared their liability and the CERA Audit party arrived at the demand based on the records submitted by them. Out of the total demand of Rs.96,80,867/- made in the Notice, Rs.86,00,867/- was paid before the issuing of the Notice. As per their calculation, they admitted a higher liability of Rs.1,08,13,836/- as against the demand of Rs.96,80,867/- made in the Notice. The balance amount was also paid subsequently along with interest.

Further, they stated that as they have paid the entire amount of service tax confirmed along with interest, they could have availed of the SVLDRS Scheme, but could not do so due to illness and demise of one of the working partners. Accordingly, they requested for waiver of penalty under Section 80 of the Finance Act, 1994.

The adjudicating Authority confirmed the demand over the demand made in the Notice because the same was admitted by the Appellant and the excess liability was not disputed. He stated that but for the scrutiny of the records of the Appellant by CERA Audit, the service tax payable would have escaped. Thus, he contended that the extended period has been rightly invoked.

Notice only says that ‘had the scrutiny of records not been conducted by the Audit, the nonpayment of service tax could have gone undetected’. There is no other evidence brought on record to allege suppression of fact on the part of the Appellant to evade payment of tax. A two-member bench comprising Mr. Ashok Jindal, Member (Judicial) and Mr. K. Anpazhakan, Member (Technical)  observed that “if the Appellant has any intention to evade payment of tax, they could not have declared more tax liability than what was demanded in the Notice, on their own volition. Thus, we hold that there is suppression of fact with an intention to evade payment of tax has been not established in this case. Accordingly, we observe that it is a fit case to invoke the provisions of Section 80 of the Finance Act, 1994 and waive the penalty and we do the same.”

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