2012 (7) TMI 164 - AT - Service Tax

Penalty under Section 76 and 78 simultaneously - Non-payment of service tax liability under the category of Management, Maintenance and Repair Services - appellant before issuance of show cause notice has paid the entire amount of service tax liability, interest and 25% of the penalty imposed under Section 78 of the Finance Act, 1994, within 30 days of the issuance of the adjudication order Held that - Provisions of Section 78 was amended from 10.05.2008, wherein an amendment is brought in indicating that, where penalties payable under Section 78, no penalty under the provisions of Section 76 shall be attracted - show cause notice is issued to the appellant on 18.6.2008 and whereas the amendment to Section 78 was carried out on 10.05.2008 Penalty u/s 76 not sustainable In favor of assessee

Summary

Issues:
Non-payment of service tax liability under Management, Maintenance, and Repair Services category for the material period 01.04.2004 to 31.03.2007; Imposition of penalty under Section 76 of the Finance Act, 1994.

Analysis:
The appellant was charged with non-payment of service tax liability under the Management, Maintenance, and Repair Services category for a specific period. The demand was based on document inspection, and before the show cause notice, the appellant paid the entire service tax liability, interest, and a portion of the penalty imposed under Section 78 of the Finance Act, 1994. The appellant contested the penalty under Section 76, leading to the current appeal against the Order-in-Appeal. The first appellate authority upheld the penalty, prompting the appellant to further appeal.

The main argument presented by the appellant's Chartered Accountant was centered around an amendment to Section 78 on 10.05.2008, which stated that if penalties were payable under Section 78, no penalty under Section 76 would be attracted. Citing judgments from various High Courts and a Tribunal decision, the appellant sought relief from the penalty under Section 76 based on the timing of the show cause notice issued post-amendment.

In contrast, the Senior Departmental Representative argued that simultaneous penalties under Sections 76 and 78 could be imposed, referencing a specific judgment from the High Court of Delhi. The Tribunal carefully considered both sides' submissions and reviewed the record to make a decision.

The Tribunal focused solely on the penalty imposed under Section 76 in this case, noting that the appellant had accepted the service tax liability, interest, and penalty under Section 78 and had paid the entire amount within 30 days of the adjudication order. The show cause notice was issued after the Section 78 amendment on 10.05.2008.

Relying on the High Court of Karnataka's judgment in a similar case, the Tribunal concluded that penalties under Section 76 and 78 operate in mutually exclusive areas. The Tribunal highlighted the distinct nature of the offenses under both sections and the legislative intent behind the Section 78 amendment. The Tribunal found the appellant's argument in line with legal provisions and set aside the impugned order, allowing the appeal.

The Tribunal distinguished the case from the precedent cited by the Senior Departmental Representative, emphasizing the timing of the show cause notice post-amendment. Following the legal position clarified by the High Court of Karnataka, the Tribunal ruled in favor of the appellant, setting aside the penalty under Section 76 based on the specific circumstances and legal interpretation.

In conclusion, the Tribunal's decision was based on the legislative intent behind the Section 78 amendment, the distinct nature of penalties under Sections 76 and 78, and the timing of the show cause notice in relation to the statutory amendment. The appeal was allowed, and the impugned order imposing the penalty under Section 76 was set aside.