Malafide cannot be attributed to the Assessee on detection of short payment by the Department prior to filing of ST-3

Pectjem Classes (the Appellant) is a service provider under the category of Commercial Training and Coaching services. Their premises was visited by the officers on October 14, 2008 and from the records maintained by the Appellant, it was found that for the period May 2008 to September 2008, they have deposited less Service tax to the tune of Rs. 2,96,480/-.

Thus, proceedings were initiated against the Appellant for recovery of Service tax along with interest and imposition of penalties under various Sections of the Finance Act, 1994 (the Finance Act). Being aggrieved, the Appellant preferred an appeal before the Hon’ble CESTAT, Delhi contesting the amount of penalties.

The Appellant contended that the period involved is from May 2008 to September 2008 and the ST-3 for the said period was yet to be filed by October 25, 2008. Inasmuch as ST-3 return was yet to be filed, the Appellant would have reconciled the entire figures at the time of filing of return and would have deposited the Service tax accordingly. Hence, the Appellant prayed for setting aside the penalties.

The Hon’ble CESTAT, Delhi held that detection of short payment by the officers prior to filing of ST-3 is a premature detection. The Appellant has given a plausible explanation of short payment by submitting that inasmuch as entries were not made in the computers and the data was yet to be entered, there was no mala fide on their part not to pay Service tax. It was further held when that the entire case of the Revenue is based upon the scrutiny of the statutory records maintained by the Appellant, the Appellant was not in a position to evade any Service tax. Hence, the penalties imposed upon the Appellant were set aside while the demand of Service tax was confirmed along with interest.

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