2013 (7) TMI 508 - AT - Service Tax

Penalty u/s 76, 77 and 78 - Service Tax and interest was paid by the assessee after summons were issued to them and investigation were initiated against assessee - It is not their case that they have paid tax and interest on their own - provision of Section 73(3) are not applicable when ingredients of Section 73(4) are present Court relied on Bajaj Travels Ltd. Versus Commissioner of Service-tax (2011 (8) TMI 423 - DELHI HIGH COURT ) - Held that - Assessee were also not entitled to benefit of 25% tax amount as penalty as they have not deposited 25% tax amount as penalty within one month of receipt of the order penalties under Section 76 and Section 78 operate in different fields and penalty under Section 76 and Section 78 are imposable appeal decided against asseessee.

Summary

Issues:
- Liability for service tax and penalty under Sections 76, 77, and 78 of the Act.
- Applicability of Section 73(3) and 73(4) of the Finance Act.
- Benefit of 25% tax amount as penalty.
- Impact of the amendment of Section 78 on penalty under Section 76.
- Simultaneous imposition of penalties under Section 76 and Section 78.

Analysis:

The appeal before the Appellate Tribunal CESTAT New Delhi involved M/s Care & Cure Pvt. Ltd. challenging an Order in Revision dated 06.08.2009 regarding service tax issues. The appellants, franchisees of Hindustan Lever Ltd., provided Beauty Parlour services without paying service tax or filing ST-3 Returns between 1.10.2005 to 31.3.2007. An investigation revealed this, leading to a Show Cause Notice demanding service tax and interest. The Assistant Commissioner dropped the proceedings, but the Commissioner issued a fresh notice, culminating in the imposition of penalties under Sections 76, 77, and 78 of the Act, which the appellants contested in the appeal.

The main contention of the appellants was that as they had paid the service tax and interest before the Show Cause Notice, they should not be liable for any penalty under Section 73(3) of the Finance Act. However, the Tribunal noted that the payment was made after summons and investigation had started, not voluntarily. Additionally, the Tribunal clarified that Section 73(3) does not apply when Section 73(4) requirements are met. The appellants also sought the benefit of a 25% tax amount as a penalty, which was denied as they had not deposited this amount within the stipulated time. They argued that after an amendment to Section 78, penalty under Section 76 was not possible, but the Tribunal held that penalties under Section 76 and Section 78 could be imposed simultaneously, citing a relevant High Court case.

Ultimately, the Tribunal rejected the appeal, upholding the imposition of penalties under Sections 76, 77, and 78 of the Act. The judgment clarified the applicability of various provisions of the Finance Act and highlighted that penalties under different sections could coexist, depending on the circumstances of the case.