2010 (3) TMI 816 - HC - Service Tax

Penalty - contention of the assessee that the penalty provision in terms of S. 76 of the Finance Act proposing to levy penalty at the rate of Rs. 100/- day has come into effect only from 10-9-2004 and that the respondent herein had failed to apy service tax for the period august 2001 to October 2002 and considering the said period, the Revenue cannot levy penalty at the rate of Rs. 100/- per day by relying upon the provisions of S. 76 as it is only prospective in nature and not retrospective - Held that - Revenue is empowered to levy penalty at the rate of Rs. 100/- per day if the assessee fails to pay duty only in respect of the period from 10-9-2004 onwards and not prior to the said date, As the duty payable in this case is prior to 10-9-2004, appeal filed by Revenue dismissed

Summary

Issues:
1. Challenge to concurrent findings of orders passed by the Commissioner of Appeals and CESTAT regarding the levy of penalty under Section 76 of the Finance Act.
2. Interpretation of the effective date of penalty provisions for failure to pay duty by the assessee.

Analysis:
1. The appeal before the Karnataka High Court involved a challenge by the revenue against the concurrent findings of the Commissioner of Appeals and CESTAT regarding the levy of penalty under Section 76 of the Finance Act. The main issue was whether the penalty imposed in the original order was under Section 76 as it stood during the period from August 2001 to October 2002 when the service tax liability arose.

2. The Court considered the contention of the assessee that the penalty provision under Section 76 proposing to levy penalty at the rate of Rs. 100 per day came into effect only from September 10, 2004. The assessee argued that for the period from August 2001 to October 2002, the revenue cannot levy penalty at the rate of Rs. 100 per day as Section 76 was prospective and not retrospective. Both the Tribunal and the Commissioner found that the amended provision did not apply to the said period.

3. The appellant's counsel relied on a judgment in the case of ETA Engineering Ltd., arguing that even for the period before September 10, 2004, the Tribunal confirmed the penalty at the rate of Rs. 100 per day. However, the respondent's counsel contended that the Tribunal in the ETA Engineering Ltd. case did not consider the effective date of the amended provision and the question was not brought to its notice.

4. After hearing both parties, the Court held that the Tribunal in the ETA Engineering Ltd. case did not consider the effective date of the amended provision and since the question was not raised before the Revenue, that judgment could not be followed. The Court concluded that the revenue could levy penalty at the rate of Rs. 100 per day only for failure to pay duty from September 10, 2004, onwards and not for the period prior to that date.

5. Ultimately, as the duty payable in the present case was prior to September 10, 2004, the Court dismissed the appeal, ruling against the Revenue and upholding the findings of the Commissioner of Appeals and CESTAT regarding the levy of penalty under Section 76 of the Finance Act.