Monday, April 22, 2013

Sec. 73(3) doesn’t contemplate issuance of SCN, except where assessee doesn’t pay ST even after demand

On receipt of intimation under section 73(3), if there is short-payment by assessee, then, instead of issuing show-cause notice straight away, department must send a letter asking assessee to pay such amount

During the periods from April, 2007 to July, 2007 and November to December, 2007, the assessee had utilized Cenvat Credit of certain amount for payment of Service Tax in respect of stock broker service provided by it. It was found that this credit was not admissible to the assessee since it was availed after end of the month and as soon as it was pointed out, the assessee paid the amount with interest. Nonetheless, on verification, it was found that there was a short payment of certain amount and this was pointed out by way of issuing show-cause notice. In the impugned order, penalty of Rs.5000/- was imposed under section 77. 

The Tribunal set aside the penalty with the following observations.

1) As per section 73(3), read with proviso thereto on receipt of intimation under section 73(3), if there was short-payment, then, instead of issuing show-cause notice straight away, department should have sent a letter asking assessee to pay such amount;

2) Further, when the assessee had discharged short-paid service tax along with interest, show-cause notice should have been dropped;

3) Hence, penalty under section 77 could not have been imposed, which was set aside accordingly - VSE Stock Services Ltd. v. Commissioner of Central Excise [2013] 32 taxmann.com 187 (Ahmedabad - CESTAT)