2014 (7) TMI 851 - AT - Service Tax

Penalty u/s 76 & 78 - Simultaneous penalty - Held that - While High Courts of Kerala and Delhi opined that prior to the amendment w.e.f . 10.5.2008 by a proviso introduced to Section 78, by the Finance Act, 2008, penalties under Sections 76 and 78, which operate on different aspects could be imposed vide Assistant Commissioner of Central Excise Vs. Krishna Poduval - 2005 (10) TMI 279 - Kerala High Court and Bajaj Travels Ltd. Vs. CST 2011 (8) TMI 423 - DELHI HIGH COURT , the Punjab & Haryana High Court in CCE Vs. First Flight Couriers Ltd. - 2011 (1) TMI 52 - High Court of Punjab and Haryana recorded a contrary view, following its earlier judgement in CCE Vs. Pannu Property dealers 2010 (7) TMI 255 - PUNJAB AND HARYANA HIGH COURT and on the ground that since Section 78 is more comprehensive and provide for a higher quantum of penalty, though technically the scope of Section 76 and 77 are different, penalty under Section 76 may not be justified where penalty is already imposed under Section 78. - Decided against Revenue.

Summary

Issues:
1. Appeal against order by Commissioner (Appeals), Chandigarh.
2. Taxability of Business Auxiliary Services (BAS) provided to overseas entity.
3. Imposition of penalties under Sections 75A, 76, 77, and 78.
4. Conflicting views on imposition of simultaneous penalties under Sections 76 and 78.
5. Precedent to be followed in case of conflicting opinions between different High Courts.

Analysis:

1. The appeal was filed by the Revenue against the order passed by the Commissioner (Appeals), Chandigarh, partially allowing the appeal of the respondent/assessee against the order of the Assistant Commissioner, Central Excise, Jalandhar. The assessee was engaged in the business of money transfer under an agreement with M/s Western Union Financial Services, USA, and proceedings were initiated alleging the provision of taxable Business Auxiliary Services (BAS) to the overseas entity from India.

2. The primary authority confirmed a tax demand and imposed penalties under various sections of the Act, along with interest. The appellate Commissioner confirmed the demand of service tax, interest, and penalties under Sections 75 and 78 but dropped the penalty imposed under Section 76, citing a Tribunal judgment that no penalty could be imposed simultaneously.

3. The issue of imposing simultaneous penalties under Sections 76 and 78 was examined, with conflicting views from different High Courts. While some High Courts allowed the imposition of both penalties, others, like the Punjab & Haryana High Court, held that penalty under Section 76 may not be justified if a penalty is already imposed under Section 78. The Tribunal followed the decision of the Punjab & Haryana High Court in a similar case and dismissed the appeal by Revenue.

4. The Tribunal referred to a Larger Bench decision regarding following the decision of the High Court within whose jurisdiction the issue arises. Based on this guidance, the Tribunal followed the decision of the Punjab & Haryana High Court in a previous case and held that simultaneous penalties under Sections 76 and 78 could not be imposed on the assessee whose transactions and cause of action arose within the jurisdiction of that High Court. The appeal by Revenue was dismissed accordingly.

This detailed analysis of the judgment provides insights into the legal issues involved, the application of relevant sections of the Act, and the considerations taken into account while deciding on the imposition of penalties.