CESTAT: Where service tax with interest is paid prior to SCN being issued then such notice cannot be issued u/s 73(3)

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Assessee was receiving services of Bandwidth Charges and was required to pay service tax under reverse charge mechanism.They were also providing “Web Hosting Service” for which they were required to pay service tax.

They were issued with SCN wherein there were proposals to appropriate service tax amounting to Rs.6,25,269/- and interest of Rs.2,04,843/- deposited by assessee on Bandwidth Service Charges.

Further, there were proposal to appropriate Rs.9,38,083/- – Service tax and interest on the same amounting to Rs.4,63,867/- deposited by assessee on “Web Hosting Services” and there was proposal to appropriate said amount against the demand of service tax of Rs.17,35,326/-.

Further, there was a proposal of imposition of penalty on assessee under Section 78 of FA, 1994 – Demand on “Web Hosting Service” remains to Rs.9,38,083/- which was paid by them before issuance of SCN along with appropriate interest. Further, reverse charge service tax on Bandwidth Charges was also paid by them along with interest before issuance of SCN.


Revenue did not have authority to issue SCN in terms of provisions of Sub-section (3) of Section 73 of FA, 1994. Therefore, question of proposal of imposition of penalty under Section 78 does not arise.

Citation: 2018-TIOL-2343-CESTAT-ALL