2011 (9) TMI 813 - AT - Service Tax

Penalty liability to pay service tax - Business Auxiliary Service - period of demand is from 01.07.2003 to 20.09.2004. Prior to 21.07.2003, one Shri C.M. Kamaraj was running the proprietorship concern by the name of M/s. Sakthi Celcom and with effect from 21.07.2004, the present proprietor Shri Jaykumar continued of provision of Business Auxiliary Service to M/s.Aircel Ltd., although arguments are raised as to the liability of Shri Jaykumar to tax prior to the date when he became the proprietor such arguments are not pressed and during the hearing it is clarified that the only challenge is to the imposition of penalties. no penalty can be imposed on the ground that the assessees are not aware of their liability to pay service tax. penalty cannot be totally set aside in the absence of any appeal against imposition thereof by the adjudicating authority. penalty of Rs.1,22,569/- is to be treated as a penalty under the provisions of 76 and penalty of Rs.1000/- under Section 77 of the Finance Act, 1994, is also upheld. appeal is allowed

Summary

Issues involved: Challenge to imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994 for providing Business Auxiliary Service to M/s.Aircel Ltd.

Analysis:
1. Validity of show-cause notice: The assessees contested the validity of the show-cause notice issued to the proprietary concern, arguing that it should have been issued to the individual proprietor. The tribunal noted that decisions from the Madras High Court cited by the assessees were related to criminal proceedings and not directly applicable to civil proceedings under the Central Excise Act, 1944. The tribunal held that the notice issued to the proprietary concern was valid, and the challenge on this ground was dismissed.

2. Penalty imposition: The assessees claimed that they were not aware of their liability to pay service tax, challenging the imposition of penalties. The tribunal observed that the assessees did not appeal against the judicial order imposing the consolidated penalty under Sections 76, 77, and 78 of the Finance Act, 1994. The Commissioner-in-Revision converted the consolidated penalty into separate penalties under all three provisions. The tribunal agreed with the Revenue that penalty imposition cannot be set aside entirely in the absence of an appeal against it. However, considering the liability of the individual proprietor to tax from a specific date and the period of demand, the tribunal upheld a reduced penalty of Rs.1,22,569/- under Section 76 and a penalty of Rs.1000/- under Section 77 of the Finance Act, 1994.

3. Final decision: The tribunal partially allowed the appeal, upholding penalties under Sections 76 and 77 of the Finance Act, 1994 in specified amounts. The judgment was dictated and pronounced in open court.