No penalty for precocious conduct by depositing tax to avoid controversy: Delhi HC

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HC upholds CESTAT order setting aside penalty u/s 78 of Finance Act, 1994 where assessee suo motu deposited tax on reverse charge basis along with interest for extended limitation period; Notes that assessee was engaged in financing capital expenditure for Indian Railways and to avoid unnecessary dispute/controversy, remitted service tax on arrangement & upfront fees paid to several non-resident financial institutions in respect of overseas borrowing;

HC rejects Revenue contention that since assessee had paid service tax for extended period without any contest, it could be inferred that assessee accepted its fault and therefore, requirement for imposition of penalty u/s 78 i.e. fraud, collusion, misstatement, suppression of facts or contravention of provisions of the Act/Rules with the intent to evade tax was satisfied; Observes, “Non-contest in the proceedings under Section 73 cannot be used as a ground or reason to establish and show that requirements of Section 78 are satisfied”; Further, stating that goodness and precocious conduct of assessee in making payment has to be appreciated and not condemned, finds no reason to interfere with findings of CESTAT

Citation: TS-392-HC-2017(DEL)-ST

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