2011 (2) TMI 573 - AT - Service Tax

Levy of penalty - Held that the respondent has not come in appeal against the service tax demanded u/s 73 of the Finance Act, 1994 - Short payment of tax is enough to impose penalty u/s 78 of the Finance Act, 1994 even though the respondent was cooperative to the investigation - Penalty proceeding being independent of adjudication, levy of penalty to the tune of 25 per cent of the service tax demand, following the judgment of the Hon ble High Court in K.P. Pouches (P.) Ltd. v. Union of India 2008 -TMI - 30328 - HIGH COURT OF DELHI , would be justified - Decided in favour of assessee.

Summary

Issues:
Appeal against waiver of penalties under sections 75(A), 76, 77, and 78 of the Finance Act, 1994.

Analysis:
The Revenue filed an appeal challenging the first Appellate order that waived penalties imposed under various sections of the Finance Act, 1994. The Revenue argued that the appellant had paid the tax and interest before adjudication, failed to seek registration, and there was suppression of facts leading to penal actions under sections 78 and 76. The Revenue contended that the first Appellate order granting immunity to the respondents should be reversed, and the adjudication order should be restored.

The appellant's counsel countered that the respondents cooperated with the investigation, paid taxes with interest before adjudication, and there was no mala fide intent or suppression of facts. The appellant sought relief based on these grounds.

Upon hearing both sides and reviewing the records, it was observed that the respondent did not appeal against the service tax demanded under section 73 of the Finance Act, 1994. Despite cooperation during investigation, the short payment of tax warranted a penalty under section 78. Referring to relevant judgments, it was deemed justified to impose a penalty of 25% of the service tax demand. The appellant was not given an opportunity to exercise the option to pay within the stipulated period, as required by law.

Recognizing the respondent's case for granting the option to pay a concessional penalty, the Tribunal directed that the respondent be given such an option, limiting the penalty to 25% of the service tax demand. The first Appellate order was modified accordingly regarding the penalty under section 78.

Regarding the penalty under section 76, it was decided to restrict it from the date of default until the deposit of the service tax, leading to a modification of the first Appellate order on this aspect. The Tribunal found no merit to interfere with the adjudication finding on the penalty under section 77, thus reversing the first Appellate order granting immunity under that section.

Concerning the penalty under section 75A, as no reason was provided in the first Appellate order to grant immunity, the Tribunal reversed the first Appellate order on this account as well. Consequently, the Revenue obtained full relief regarding penalties under sections 75A, 76, and 77, while the relief under section 78 was limited as indicated above. The adjudication order was restored to the extent mentioned, setting aside the first Appellate order.