2013 (6) TMI 203 - AT - Service Tax

Penalty - service tax was paid during investigation with interest - reverse charge on GTA Service - The proposal to impose penalties on the assessee under Sections 76, 77 and 78 of the Act, as contained in the original show-cause notice dated 04.09.2008, was dropped by the original authority. In revisionary proceedings, the Commissioner has imposed a penalty of ₹ 1,03,009/- on the assessee under Section 76 of the Act, ordered appropriation of the late fee of ₹ 14,000/- towards penalty under Section 77 of the Act, and dropped the proposal for imposition of penalty under Section 78 of the Act. Held that - the department s allegation that they had suppressed the value of the taxable service with intention to evade payment of service tax was tacitly accepted by the assessee. It is indisputable that the same constitutes one of the grounds for imposition of penalty under Section 78 of the Act. Therefore, the Commissioner s decision to drop this penalty on the premise that the assessee did not have any intention to evade payment of service tax cannot be sustained. In so far as the amount of service tax cesses paid by them for the normal period is concerned, there can be no corresponding penalty under Section 78 of the Act. In this scenario, the quantification of penalty under Section 78 of the Act in the instant case will be left to the original authority. - Decided partly in favor of revenue.

Issues involved:
1. Imposition of penalty on the respondent under Section 78 of the Finance Act 1994.
2. Contesting the penal proposal under Section 78 of the Act.
3. Appropriation of late fee towards penalty under Section 77 of the Act.
4. Determination of penalty under Section 78 based on the amount of service tax paid.

Detailed Analysis:
1. The appeal filed by the department sought the imposition of penalties on the respondent under Sections 76, 77, and 78 of the Finance Act 1994. The Assistant Commissioner confirmed a demand against the respondent for service tax, education cesses, and late fee. The original order did not impose penalties under Sections 76, 77, and 78, leading to the department's dissatisfaction. The jurisdictional Commissioner issued a show-cause notice under Section 84, contesting the penalties. The revisionary authority imposed penalties under Sections 76 and 77 but dropped the penalty under Section 78, prompting the department's appeal against this decision.

2. The appellant argued that the respondent had the intention to evade service tax payment, citing their failure to obtain registration or file returns. The dropping of the penalty under Section 78 was contested, claiming that the respondent tacitly acknowledged the circumstances by paying the dues without challenging the original order. The dropping of the penalty was deemed legally unsustainable. The Commissioner imposed penalties under Sections 76 and 77, but the appropriation of late fee towards penalty under Section 77 was challenged as beyond the scope of the show-cause notice.

3. The original show-cause notice invoked the proviso to Section 73(1) for suppression of taxable service value to evade service tax payment. The respondent accepted the order confirming the demand and payments made, implying acceptance of the suppression allegation. The dropping of the penalty under Section 78 based on the lack of intention to evade payment was deemed unsustainable. The quantification of the penalty under Section 78 was deemed necessary based on the service tax and cesses paid for the extended period, leaving the determination to the original authority.

4. The judgment set aside the appropriation of late fee towards penalty under Section 77, rejected the appellant's prayer for penalty under Section 77, and directed the imposition of a penalty equal to the service tax and education cesses paid by the respondent for the extended period under Section 78, to be quantified by the original authority after providing a hearing opportunity to the assessee for quantification purposes.

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