75% Service Tax Penalty Set Aside After Timely 25% Payment: CESTAT Bangalore

Mercedes Benz Research and Development India Private Limited Vs Commissioner of Service Tax (CESTAT Bangalore)

Summary: CESTAT Bangalore allowed the appeal of Mercedes Benz Research and Development India Pvt. Ltd. on the limited issue of penalty. The appellant, a 100% Export Oriented Unit registered for providing Business Support Services, Consulting Engineers Services and Information Technology Software Services (ITSS), was found during investigation to have not paid service tax on ITSS from 16.05.2008 onwards.

Service tax of Rs.60,33,552/- for the period from 16.05.2008 to 31.03.2010, which had been paid by the appellant, was confirmed and appropriated along with interest. The adjudicating authority also imposed a penalty of Rs.1,000/- under Section 77 and an equivalent penalty under Section 78 of the Finance Act, 1994, while giving the appellant an option to pay 25% of the penalty within 30 days of receipt of the order.

The Tribunal noted that the show-cause notice was issued on 30.06.2010, whereas the payments confirmed in the impugned order had already been made by the appellant on 05.05.2010 along with interest, much before issuance of the notice. At the hearing, the appellant submitted that it had additionally remitted Rs.15,09,388/-, representing 25% of the duty amount as penalty, on 27.07.2011. This payment was within 30 days from the date of the impugned order dated 29.06.2011. Consequently, CESTAT set aside the balance penalty representing 75% of the duty amount. The Tribunal held that, in view of the payments already made, nothing survived in the appeal and accordingly allowed it.