2011 (6) TMI 360 - AT - Service Tax

Application for rectification - eligibility to pay the penalty at the reduced rate of 25% of the penalty as per the provisions of Section 78is not mentioned in OIO - Held that - As per Section 74 of the Finance Act, 1994, an application for rectification can be filed within a period of two years from the date of which the order stated to have contained errors was passed. Therefore, the assessee had filed the rectification application within the period prescribed in the statute. Therefore, the period of limitation for filing the appeal to Commissioner (Appeals) is to be reckoned from the date of which the order has been passed on the rectification application. Since such application was disposed of on 27.9.2010, and the appeal was filed before the Commissioner (Appeals) on 18.10.2010, the appeal could not have been dismissed on the ground of time-bar. Since there is no finding on the merits of the demand, by the Commissioner (Appeals) set aside the impugned order and remit the case to the lower appellate authority for decision on merits after extending a reasonable opportunity of hearing to the assessees. In favour of assessee by way of remand.

Summary

Issues: Rectification of errors in the Order-in-Original, imposition of penalty under Sections 76 and 78 of the Finance Act, 1994, dismissal of appeal as time-barred.

Analysis:

The judgment by the Appellate Tribunal CESTAT, Chennai, addressed the issue of rectification of errors in the Order-in-Original. The assessees sought rectification, claiming they were eligible for a reduced penalty of 25% under Section 78 of the Finance Act, 1994, as they had paid the entire service tax amount along with interest before receiving the show cause notice. The Tribunal noted that the rectification application was filed within the prescribed two-year period under Section 74 of the Act. The Tribunal found that the appeal to the Commissioner (Appeals) should not have been dismissed as time-barred since the rectification application was disposed of after the appeal was filed. As there was no decision on the merits of the demand by the Commissioner (Appeals), the Tribunal set aside the order and remitted the case for a decision on the merits, ensuring a fair hearing for the assessees.

The judgment also delved into the issue of penalty imposition under Sections 76 and 78 of the Finance Act, 1994. The assessees argued that as per Section 78, penalty under Section 76 cannot be imposed when penalty under Section 78 has been levied. The communication from the office of the Asst. Commissioner rejected this contention, stating that the provisions of Sections 76 and 78 were mutually exclusive only from a specific date. The Tribunal did not find the assessees' argument prima facie acceptable, indicating that the order passed was in accordance with the law. However, the Tribunal's decision primarily focused on the procedural aspect regarding the dismissal of the appeal as time-barred, rather than delving into the substantive issues related to penalty imposition under the Finance Act.

In conclusion, the Tribunal allowed the appeal by way of remand, emphasizing the importance of considering the merits of the demand and providing a fair opportunity for the assessees to present their case. The judgment highlighted the significance of adhering to statutory timelines for filing appeals and the need for thorough consideration of all legal aspects before dismissing an appeal as time-barred.