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No Service Tax Penalty If Tax dues Paid Before SCN: CESTAT Ahmedabad

Case Law Details

TaxGuru Citation
2025 taxguru.in 843
Case Name
Jayhind Buildcon Pvt Ltd Vs Commissioner of C.E. & S.T.-Rajkot (CESTAT Ahmedabad)
Date of Judgement/Order
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Jayhind Buildcon Pvt Ltd Vs Commissioner of C.E. & S.T.-Rajkot (CESTAT Ahmedabad)

In the case of Jayhind Buildcon Pvt Ltd Vs Commissioner of C.E. & S.T.-Rajkot, CESTAT Ahmedabad ruled that a show cause notice (SCN) for service tax becomes invalid if the assessee clears the tax liability along with interest before the SCN is issued. The dispute arose when tax authorities audited the appellant’s records for 2010-15, identifying a service tax liability of ₹42,92,189. Subsequently, anti-evasion officers initiated an inquiry and issued an SCN on August 31, 2018, demanding ₹40,65,565. However, the appellant had already deposited ₹40 lakh towards tax and ₹6,34,560 as interest before the SCN’s issuance. Despite this, the adjudicating authority confirmed the demand and imposed a penalty under Section 78, which was upheld by the Commissioner (Appeals). The appellant, contesting only the penalty, argued that the delay was due to financial difficulties rather than any intent to evade tax.

CESTAT observed that since the appellant recorded the transactions in its books and voluntarily paid the tax and interest before the SCN, the penalty should be waived under Section 80 of the Finance Act, 1994. The tribunal referred to Section 73(3), which states that if tax and interest are paid before an SCN, no penalty or further proceedings should follow unless there is fraud or willful suppression. Finding no mala fide intent, CESTAT ruled that the penalty under Section 78 was unjustified and set it aside, allowing the appeal.

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Author Info

CA Sandeep Kanoi
Qualification: CA in Job / Business
Company: Taxguru Consultancy
Location: Mumbai, Maharashtra
Articles Published: 20,923

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