2011 (6) TMI 368 - AT - Service Tax

Reduce penalty - whether the penalty is reduced under Section 76 or Section 78 of the Act? - non payment of service tax on re-imbursement of expenses - Held that - As agreeing with the submission of revenue Commissioner (Appeals) has not indicated as to under which section he had reduced the penalty & further as per the decision of the Hon ble Supreme Court, penalty under Section 11AC is mandatory and therefore, it cannot be reduced - matter remanded to the Commissioner (Appeals) for a fresh decision after taking into account the ground raised by the Revenue in the appeal.

Issues:
1. Reduction of penalty by the Commissioner (Appeals) under Sections 76 & 78 of the Finance Act, 1994.
2. Lack of clarity on the specific section under which the penalty was reduced.
3. Appeal filed by the Revenue against the decision of the Commissioner (Appeals).
4. Requirement for the Commissioner (Appeals) to specify the section under which the penalty was reduced.
5. Mandatory nature of penalty under Section 11AC as per the decision of the Hon'ble Supreme Court.

Analysis:
1. The respondent, engaged in providing C & F agent services, did not pay service tax on re-imbursement of expenses from 1.4.2000 to 31.3.2003, leading to penalty imposition under Sections 76 & 78 of the Finance Act, 1994. The Commissioner (Appeals) reduced the penalty to Rs. 20,000, prompting the Revenue to appeal against this decision invoking Section 80 of the Act.

2. The lack of clarity arose as the Commissioner (Appeals) did not specify whether the penalty reduction was under Section 76 or Section 78 of the Act. The learned DR acknowledged the ambiguity and highlighted the importance of clarity in such decisions to avoid confusion.

3. The respondent's advocate mentioned an appeal filed by the party, but without providing details. Consequently, the focus shifted to the Revenue's appeal, assuming no appeal was filed by the party. It was noted that the respondent had not challenged the liability of service tax on re-imbursement charges but only contested the penalty and interest before the Commissioner (Appeals).

4. Upon considering both sides' submissions, it was observed that the Commissioner (Appeals) failed to specify the section under which the penalty was reduced. Referring to the mandatory nature of penalty under Section 11AC as per the Supreme Court's decision, it was concluded that the penalty cannot be reduced without clarity on the relevant section. Therefore, the matter was remanded to the Commissioner (Appeals) for a fresh decision, emphasizing the need for a clear determination of the penalty section.

5. The decision highlighted the necessity for the Commissioner (Appeals) to reconsider the penalty reduction after addressing the grounds raised by the Revenue in the appeal. The remand aimed to ensure a fair opportunity for both the appellant and respondent to present their case effectively before a revised order is issued.

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