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November 2013

2013 (31) STR 535 (Guj) Commissioner of Service Tax vs. Manan Motors Pvt. Ltd. If service tax with interest is paid in full before issuance of SCN, penalty cannot be levied : CBEC Circular dated 03-10-2007.

By Puloma Dalal, Jayesh Gogri, Mandar Telang, Chartered Accountants
Reading Time 1 mins
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Facts:

The assessee discharged its service tax liability along with full interest before the issue of SCN. The department issued a Show Cause Notice and passed an order confirming tax along with interest and penalty u/s. 76 and 78 of the Finance Act, 1994.

The department argued that since the assessee paid service tax and interest, the penalty was also quantifiable and that it should have deposited 25% penalty within 30 days of the issue of SCN.

Held:

Ordering levy of penalty of not more than 25% (Note: appears contradictory to the circular dated 03-10-2007), the Hon. High Court relying on Circular No.137/167/2006-CX dated 03-10-2007 and referring to section 73(1A) held that since the service tax and interest was deposited before issuance of SCN and at that time, neither any penalty was levied nor quantum of penalty was fixed, the respondents were not required to deposit penalty amount.

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