2011 (6) TMI 344 - AT - Central Excise

Penalty under proviso to Section 78 - The appellants also challenged the imposition of penalty @ 2% of the service tax amount per month under Section 76 as without jurisdiction, because the appellant could not have been penalized under different sections for the same alleged offence - Held that - The incidents of imposition of penalty are distinct and separate and even if the offences are committed in the course of same transaction or arises out of the same act, the penalty is imposable for ingredients of both the offences - Therefore, penalty can certainly be imposed on erring persons under both the above Sections, especially since the ingredients of the two offences are distinct and separate. Perhaps invoking powers under S. 80 of the Finance Act, the appropriate authority could have decided not to impose penalty on the assessee if the assessee proved that there was reasonable cause for the said failure in respect of one or both of the offences - Hence, gave the benefit of reduced penalty under proviso to Section 78.

Summary

Issues:
1. Imposition of service tax and interest on authorized distributors.
2. Penalties under Sections 76, 77, and 78 of the Finance Act, 1944.
3. Challenge of penalties under different sections for the same alleged offense.

Analysis:
The case involved M/s. Rahul Trade Link, authorized distributors of M/s. Tata Teleservices Ltd., who failed to discharge their obligation of paying service tax, leading to a demand notice for service tax and interest. Penalties under Sections 76, 77, and 78 were proposed, with the adjudicating authority confirming the demand and imposing penalties. The Commissioner (Appeals) upheld the demand and penalties under Section 78, but reduced the penalty under proviso to Section 78 and imposed a penalty under Section 76 as well.

The appellant argued against the equivalent penalty under Section 78, citing a Supreme Court judgment that penalty should not be imposed merely because it was lawful to do so. Additionally, the appellant challenged the imposition of penalty under Section 76, arguing that being penalized under different sections for the same alleged offense amounted to a punishment more than once for the same offense.

In considering the appeal, the Tribunal referred to a relevant judgment of the Hon'ble High Court of Kerala, which clarified the distinction between penalties under Section 76 for failure to pay service tax and Section 78 for suppression of the value of taxable service. The Tribunal concluded that separate penalties under Sections 76 and 78 could be imposed even for offenses arising from the same transaction or act, as the ingredients of the two offenses were distinct and separate. The Tribunal also noted that the appellant had voluntarily paid the duty, interest, and a portion of the penalty, indicating a bona fide impression, which led to the Commissioner (Appeals) granting a reduced penalty under Section 78.

Ultimately, the Tribunal found no infirmity or illegality in imposing separate penalties under Sections 76 and 78. The Tribunal upheld the Commissioner (Appeals) order, considering the appellant's voluntary payment and the distinct nature of the offenses under the relevant sections.

This detailed analysis highlights the key arguments, legal principles, and judgments considered in the case, providing a comprehensive understanding of the Tribunal's decision.