Full Judgment
There was a stay from the Hon'ble High Court of Madras with regard to levy of service tax on the security services. In any case, the assessee had deposited the service tax even before the issue of show cause notice except to an extent of Rs 3 lakhs. The appellant contended before the Commissioner that as the majority of the amount except Rs 3 lakhs was paid before the issue of show cause notice, question of levy of penalty does not arise. Even for the small amount of Rs 3 lakhs they contended that they held a bonafide belief that in view of the stay order of High court, they can wait for a decision to pay the balance of Rs three lakhs. Learned Counsel submits that the Tribunal/High Court and Supreme Court in the following cases have held that penalty and interest is not leviable in case if the amounts have been paid before the issue of show cause notice.
1) RINL v. CCE which was affirmed by Apex Court in 2004 (163) ELT A 53 He submits that with regard to the small amount of Rs three lakhs which was paid after the issue of show cause notice, penalty is not leviable as there were circumstances leading to the bonafied belief that the assessee can wait for the High Court's orders. Therefore in terms of the Apex Court judgment rendered in the case of Hindustan Steels Ltd v.State of Orissa , there cannot be penalty for any and every breach. He submits that the appeal could be disposed of as the issue is covered in the assessee's favour.
2. Learned DR submits that delay in payment of even part of the amount is required to be penalized, as the assessee cannot claim the benefit of waiver of penalty on the said bonafide belief held by them. Penalty is leviable and is required to be imposed in the matter. In counter learned Counsel points out that the delay in paying Rs three lakhs was only two days after the issue of show cause notice. In any case penalty of Rs. 10,000/- has been paid which should be considered as proper and they would accept that payment.
3. On a careful consideration, we notice that the amount of service tax to an extent of Rs. 37 lakhs was paid even before the issue of show cause notice. In any case penalty of Rs. 10,000/- has also been paid by the assessee for the delay in payment of Rs. 3 lakhs. The Commissioner has levied penalty of Rs 45 lakhs on the ground that the service tax was not discharged. However, the assessee had paid the service tax even before the issue of show cause notice. Therefore in terms of the above noted judgments penalty is not leviable in the present case. The Commissioner has clearly noted in para 6 of the order that the matter was lingering before the High Court of Madras and there was a stay order. Although the Commissioner has not accepted the plea that the stay order was not vacated, in any case the issue was before the High Court pertaining to levy of service tax on the security services. The appellants paid the balance of Rs 3 lakhs within two days from the receipt of show cause notice. Therefore, their plea of bonafide belief that service tax is not leviable in view of the High Court's order is to be accepted. In view of the above noted judgments, the levy of penalty in a situation where the service tax has been paid before the issue of show cause notice is required to be set aside. Therefore, we allow the stay application and appeal in the light of the cited judgments.