2013 (4) TMI 582 - AT - Service Tax

Penalties - u/s 76, 77 & 78 - appellant filed appeal on the ground that 25% penalty imposed under Section 78 of the Finance Act, 1994 has already been deposited by them and therefore penalty under Section 76 & 77 of the Finance Act, 1994 are not attracted. Held that - We are of the view that the judgment of division Bench of the Kerala High Court in the case of the Assistant Commissioner of Central Excise v. Krishna Poduval reported in 2005 (10) TMI 279 runs counter to the express provisions contained in Sections 76 and 78. In fact, in support of our contentions, we would like to point out that by Finance Act, 2008 (18 of 2008) which came into force from 10-5-2008, the Parliament has made the legal position clear by introducing a proviso to Section 78. It reads as under provided also that if the penalty is payable under this section, the provision of Section 76 shall not be attracted. In view of the above judgment, it is clearly held that amendment carried out in Section 78 of the Finance Act, 1994 is only clarificatory in nature and the position of not imposing penalty under Section 76, when penalty under Section 78 was already imposed, will hold good for the period prior to the amendment also. Based on the above observations it is held that penalty under Section 76 of the Finance Act, 1994 is not imposable once penalty under Section 78 was imposed and 25% of such penalty has already been paid by the appellant. Based on the above observations the appeal filed by the appellant is partially allowed to the above extent only.

Summary

Issues:
1. Imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994 based on a service tax case.

Analysis:
1. The appeal was filed against an order imposing penalties under Sections 76, 77, and 78 of the Finance Act, 1994. The appellant argued that since they had already deposited 25% penalty under Section 78, penalties under Sections 76 and 77 were not applicable, citing relevant judgments for support.

2. The appellant contended that penalties should not be imposed based on a comparison between income tax returns/balance sheets and ST-3 returns, referencing specific judgments to support their argument. They emphasized that penalties under Sections 76, 77, and 78 should not apply in this scenario.

3. The department maintained that the penalties were justified, leading to a dispute solely concerning the imposition of penalties under Sections 76, 77, and 78. The original adjudicating authority had imposed a penalty under Section 78, which was later increased by the Commissioner without providing the appellant an option to avail the 25% penalty benefit within 30 days, as mandated by a High Court judgment.

4. The Tribunal noted that the appellant had already paid 25% of the penalty under Section 78 without being given the option to avail the benefit, as required by law. Consequently, the Tribunal held that no further penalty under Section 78 was recoverable. However, a penalty under Section 77 for procedural non-compliance was upheld.

5. Regarding the penalty under Section 76, the Tribunal referred to a Karnataka judgment highlighting the distinction between penalties under Sections 76 and 78. The Tribunal concluded that once a penalty under Section 78 was imposed and 25% paid, no additional penalty under Section 76 was applicable, aligning with the legal provisions and clarifications.

6. Based on the legal analysis and precedents cited, the Tribunal partially allowed the appeal, ruling that the penalty under Section 76 was not imposable once a penalty under Section 78 had been imposed and 25% of it had been paid by the appellant. The decision was made in accordance with the relevant legal provisions and clarifications provided by the judgments referenced during the proceedings.