2011 (2) TMI 466 - AT - Service Tax

Demand with penalty - Business Auxiliary Service - It is not in dispute that the entire interest stands paid within one month from the date of issue of the adjudication order. It is also not in dispute that the original authority has not given option to pay 25% penalty as envisaged in proviso to Section 11AC of the Central Excise Act - It has been settled in several decisions of the Tribunal including the one relied upon by the consultant that even during the period prior to the amendment of Section 78 w.e.f. 10-5-08, no separate penalty under Section 76 is warranted when there is a penalty under Section 78 - Decided in favour of the assessee

Summary

Issues: Appeal against order confirming service tax demand, interest, and penalties under different sections. Challenge to penalties imposed by original authority. Interpretation of proviso to Section 11AC for concessional penalty.

Analysis:

1. The case involved an appeal by the department against the order of the Commissioner (Appeals) confirming the demand of service tax, interest, and penalties imposed by the original authority. The respondent, a manufacturer of textile made-ups, availed the services of commission agents for procuring overseas orders and paid for the same. The department alleged that the respondent availed 'Business Auxiliary Service' from overseas parties, necessitating payment of service tax as the recipient. The respondents paid the service tax amount but contested the penalties imposed on them.

2. The Commissioner (A) set aside the penalties under Section 76 and 77, providing an option to pay 25% of the penalty within a specified timeframe. The department filed an appeal seeking to set aside the Commissioner's order and reinstate the original authority's decision. The department argued that failure to pay the penalty within the stipulated time negated the concession. The respondent's consultant contended that sustaining penalty under Section 78 precluded a separate penalty under Section 76, citing relevant case law.

3. The Tribunal considered the submissions and records, noting that the respondent had paid the service tax and interest promptly. It observed that the original authority did not provide the option to pay reduced penalty as required by proviso to Section 11AC. Relying on a High Court decision, the Tribunal upheld the Commissioner's decision to extend the benefit of concessional penalty. It emphasized that when penalty under Section 78 is applicable, separate penalties under Sections 76 and 77 are not justified.

4. The Tribunal highlighted that the offence under Section 78 encompasses the offence under Section 76, and past precedents supported this interpretation. Given the circumstances, the Tribunal found no valid reason to interfere with the Commissioner's order. Consequently, the department's appeal was rejected, and the cross-objection supporting the Commissioner's order was disposed of.

In conclusion, the Tribunal upheld the Commissioner's decision to set aside penalties under Sections 76 and 77, emphasizing the applicability of concessional penalty provisions and the absence of grounds to overturn the order.