Case Law Details

Case Name : CCE, Panchkula Vs. M/s. Krishna Cylinders [2015 (1) TMI 1197 - CESTAT NEW DELHI]
Appeal Number :
Date of Judgement/Order :
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No penalty could be imposed when the amount of Service tax has been paid along with interest before issuance of Show Cause Notice

During the course of audit it was revealed that Krishna Cylinders (Assessee)has not paid Service tax during the period from April 1, 2006 to March 31, 2007 on outward Goods Transportation services. However, on being pointed out by the audit team, the Assessee paid the entire amount of Service tax along with applicable interest. Thereafter, a Show Cause Notice (SCN) was issued to the Assessee to appropriate the amount already paid by the Assessee and for imposition of penalties under Sections 76, 77 and 78 of the Finance Act, 1994 (Finance Act).

Thereafter, in the Adjudication proceedings, the amount already paid by the Assessee was appropriated against the demand of Service tax and interest and various penalties under Sections 76, 77 and 78 of the Finance Act were confirmed.

On appeal being filed to the Ld. Commissioner (Appeals), the penalties under Sections 76, 77 and 78 of the Finance Act were set aside by invoking Section 80 of the Finance Act. Being aggrieved, the Revenue preferred an appeal before the Hon’ble CESTAT,Delhi.

The Revenue submitted that in the present case, the demand has been confirmed and admitted by the Assessee for the extended period of limitation. Therefore, the Assessee cannot escape the penalties. It was further submitted when extended period of limitation has been invoked and liability has been admitted by the Assessee, benefit of Section 80 of the Finance Act cannot be granted. Furthermore, relying upon the decision in the case of Machino Montel (I) Ltd.[2006 (202) ELT 398 (P&H)], it was submitted that mere deposition of the duty demand before issuance of SCN cannot give the benefit to the Assessee for non-imposition of penalty.

The Hon’ble CESTAT,Delhi after discussing Section 73(3) of the Finance Act held that as per the provisions of Section 73(3) of the Finance Act, the SCN was not required to be issued when Service tax along with interest has been paid by the Assessee before issuance of SCN. Further, in SCN there were no specific allegations of non-payment by way of fraud, collusion, willful misstatement or suppression of material facts.

Accordingly, it was held that although the SCN was issued to the Assessee which was not required to be issued as per Section 73(3) of the Finance Act, no penalty could be imposed.

(Bimal Jain, FCA, FCS, LLB, B.Com (Hons), Mobile: +91 9810604563, Email:

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One Comment

  1. Shri Trivedi Tax Consultancy says:

    Service Tax Department during the survey,had found that Health service provided by the Service providers, shall have to pay the Service Tax right from introduction of Service from 1-7-2010.Some correspondence was also made by the department. Now the Service provider determines to pay the Service Tax along with the Interest before issuance of Show cause notice.Whether, the Service Provider will get the relief from the payment of penalty?

  2. krishna says:


    We paid the service tax with interest, after pointed out by audit team without given the SCN. Then the range officer push to pay the penalty 25% for the same para. Is is correct or wrong. {we paid the penalty}

  3. unnikrishnan v says:

    This decision is to be widely circulated. The finding that no scn was required to be issued,after the payment of the tax with interest as pointed out by audit has a far reaching impact.Majority of commtes,still issue SCN, impose penalties etc and unfortunately,many Commisssioner Appeals also uphold same. Now a days any relief can be expected only from CESTAT or High /supreme Court.If judicial descipline is adhered to, CBEC shall come out with a circular ,based on this decision and ask field offices to CLOSE all such issues pending at various levels.

  4. Yogesh Panchal says:

    Dear Sir,
    pointed out by the audit team, then we have paid the entire excise duty along with applicable interest. before issue a Show Cause Notice (SCN) we have eligible for pay penalties under.

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