Penalty sustainable when service tax paid post enquiry

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Penalty sustainable when service tax paid post enquiry

AIT News Network

NEW DELHI. Bad News for Consultants who are advising the clients that no penalty is sustainable when service tax alongwith interest has been paid before the issue of show cause notice.

A ruling dated 19th December AIT-2008-13-CESTAT of Customs Excise & Service Tax Tribunal has come as a shot in the arm of Service Tax Department.

It has been ruled by the Tribunal that “imposition of penalty is sustainable when tax liability was paid only after the inquiry was conducted by the Department. Therefore, there is no merit in the appellants’ contention that the demand of tax together with interest, prior to the issue of the show cause notice, would absolve them of the liability to pay penalty.”

In this case, the entire Service Tax together with interest was paid by the appellants, who were found to have been providing services of Erection, Installation and Commissioning of plant & machinery and equipments. The appellants challenged the impugned order on the ground that, they were not to pay penalty due to instant payment of tax together with interest.

The Tribunal observed that the issue has been settled by the Tribunal in the case of AIT-2006-307-CESTAT, holding that, imposition of penalty is sustainable when tax liability was paid only after the inquiry was conducted by the Department.

(Click here for full text of ruling AIT-2008-13-CESTAT)

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