2014 (5) TMI 64 - HC - Service Tax

Demand of service tax - Penalty u/s 78 - Intention to evade tax - Held that - the intention to evade service tax is necessary to attract penalty under Section 78 of Act, 1994 - if the due tax has been deposited alongwith interest and there is no specific finding that there was any intention on the part of assessee to evade payment of tax, imposition of penalty is not justified - in the entire order of adjudicating authority, there is not even a whisper to suggest that there was any intention on the part of petitioner to evade service tax. Despite repeated query, learned counsel appearing for respondents could not show from impugned order that any such finding has been recorded. The impugned orders, to the extent as above, therefore, cannot sustain - Penalty set aside - Following decision of M/s Govind Sugar Mills Limited, Lakhimpur Khiri Vs. Commissioner of Trade Tax 2008 (4) TMI 695 - ALLAHABAD HIGH COURT - Decided partly in favour of assessee.

Summary

Issues:
Challenge to imposition of penalty under Section 78 of Finance Act, 1994 without finding of intention to evade tax.

Analysis:
The writ petition challenged an order passed by the Joint Commissioner (Adj.), Central Excise, Allahabad, which raised a demand for Service Tax along with penalties on the petitioner under Section 78 of the Finance Act, 1994. The petitioner's counsel contended that the imposition of penalty without establishing any intention to evade tax was beyond the jurisdiction, as per the requirements of Section 78 of the Act. The relevant section outlines that penalties can be imposed in cases of fraud, collusion, wilful misstatement, suppression of facts, or contravention of provisions with the intent to evade tax. The crucial aspect highlighted was the necessity of proving the "intention to evade service tax" to justify the imposition of penalties under Section 78.

The judgment emphasized the significance of establishing the intent to evade tax to impose penalties under Section 78. Referring to a previous case, the court reiterated that if the due tax had been paid along with interest and there was no explicit finding of intent to evade tax, the imposition of penalties was deemed unjustified. In the present case, the court noted the absence of any mention or indication in the adjudicating authority's order regarding the petitioner's intention to evade service tax. Despite challenges from the respondents' counsel, no evidence of such intent was presented from the impugned order. Consequently, the court found that the orders in question could not be sustained due to the lack of evidence establishing the intent to evade tax.

In conclusion, the writ petition was partly allowed, setting aside the impugned orders that imposed penalties under Section 78 of the Finance Act, 1994. The court's decision was based on the absence of findings regarding the petitioner's intention to evade service tax, highlighting the crucial requirement for such intent to justify the imposition of penalties under the relevant legal provisions.