No Section 78 Penalty as Service Tax and Interest Were Paid Before SCN: CESTAT Chennai

SPI Technologies India Pvt. Ltd. Vs Commissioner of GST & Central Excise (CESTAT Chennai)

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chennai, allowed the appeal to the extent of setting aside the penalty imposed under Section 78 of the Finance Act, 1994. The dispute before the Tribunal was limited to the imposition of penalty, as the appellant did not challenge the service tax demand on merits.

The appellant contended that when the Show Cause Notice (SCN) dated 27.08.2013 was issued, the service tax liability under the Reverse Charge Mechanism had already been discharged in 2010 after obtaining registration. The appellant argued that, in view of Section 73(3) of the Finance Act, 1994, read with Explanation 2 and Section 80, no SCN should have been issued once the service tax and applicable interest had been paid and the payment had been intimated to the department. Reliance was placed on the Karnataka High Court decision in Commissioner v. C. Ahead Info Technologies India Pvt. Ltd..

The Revenue relied on the Karnataka High Court decision in Madhav Kamath Brothers and Co. v. CCE, Hubli, contending that payment of service tax before issuance of an SCN does not automatically absolve an assessee from penalty liability under Section 78.