2014 (8) TMI 475 - AT - Service Tax

Penalty u/s 76 - Demand raised for service tax - However, on intimation assessee paid service tax before issuance of SCN - Commissioner dropped penalty demand - Held that - Demand is for the period 2004-05 to 2007-08. For the period prior to 18-4-2006 there has been decision of the Bombay High Court in the case of Indian National Shipowner Association v. UOI - 2008 (12) TMI 41 - BOMBAY HIGH COURT to the effect that service tax need not be paid by recipient of service for services provided by persons located abroad - respondent has voluntarily paid the tax when the omission was pointed out to them without contesting the issue and he has also paid the penalty under Section 78 - Decided against Revenue.

Summary

Issues:
1. Imposition of penalties under Sections 76 and 78 of the Finance Act, 1994 for non-payment of service tax to foreign agents by manufacturers of excisable goods who export their products.

Analysis:
The case involved a dispute regarding the imposition of penalties under Sections 76 and 78 of the Finance Act, 1994 on manufacturers of excisable goods who had not paid service tax to their foreign commission agents. The Revenue contended that penalties under both sections were warranted, citing a decision by the Hon'ble Kerala High Court supporting separate penalties for different reasons. On the other hand, the respondent argued, supported by the Punjab & Haryana High Court decision in CCE v. City Motors, that once a penalty under Section 78 is imposed, there is no justification for a separate penalty under Section 76. The respondent also highlighted Tribunal decisions and the amendment to Section 78 from 10-5-2008, prohibiting simultaneous penalties under both sections.

The Tribunal considered the arguments presented by both sides and noted that the demand was for the period 2004-05 to 2007-08. Referring to the Bombay High Court decision in Indian National Shipowner Association v. UOI, it was observed that prior to 18-4-2006, service tax was not required to be paid by the recipient of services provided by foreign entities. The respondent had voluntarily paid the tax upon notification of the omission and had also paid the penalty under Section 78 without contesting the issue. In light of these circumstances, the Tribunal decided to follow the decision of the Punjab & Haryana High Court, the jurisdictional High Court, and upheld the order of the Commissioner (Appeals) rejecting the appeal filed by the Revenue.

In conclusion, the Tribunal determined that in the given scenario where the respondent had rectified the omission promptly and paid the penalty under Section 78, there was no justification for imposing an additional penalty under Section 76. The decision was based on the specific facts of the case, relevant legal precedents, and the amendment to Section 78 prohibiting simultaneous penalties under both sections from a certain date.