2014 (8) TMI 545 - AT - Service Tax

Penalty u/s 78 - Suppression of facts - Malafide intention to cause evasion of duty - Held that - original authority did not impose any penalty - but the revisionary authority imposed penalty under Section 78 on the ground that the party not only disclosed information but also not submitted anything in its defence despite repeated opportunities. The said authority discarding the finding of the adjudicating authority made under Section 80 of the Finance Act, 1994 and proceeded to penalize the appellant under Sections 76 and 78 on the ground of willful contravention of law. Adjudicating authority in Para 4.10 has observed that the appellant, a public sector, has not followed any questionable modus operandi to cause evasion. To revert the finding of the Adjudicating Authority the appellate authority did not make any independent inquiry since no material borne by record could be brought by him to establish his finding and conclusion - Decided in favour of assessee.

Summary

Issues:
Penalty imposition under Section 78 of the Finance Act, 1994 based on suppression of facts and willful contravention of law.

Analysis:
The appellant challenged a revisionary order imposing a penalty under Section 78 of the Finance Act, 1994 for alleged suppression of facts. The appellant contended that the delay in tax liability discharge was due to delayed compilation of accounts by a public sector entity, BSNL, and not due to any mala fide intention to cause evasion. The Adjudicating Authority invoked Section 80 of the Finance Act, 1994, dropping the penalty considering the appellant's bona fide case. The revisionary authority, however, imposed the penalty citing the appellant's failure to submit a defense despite opportunities, leading to a willful contravention of law under Sections 76 and 78. The appellate authority noted that no independent inquiry was conducted to overturn the Adjudicating Authority's findings, as no material on record supported the revisionary authority's conclusions.

The appellate tribunal, after hearing both sides and examining the records, found that the revisionary authority's decision to penalize the appellant under Sections 76 and 78 lacked sufficient grounds and independent inquiry. The Adjudicating Authority's observation that the appellant, being a public sector entity, did not engage in questionable practices to evade tax was considered. Consequently, the tribunal allowed the appeal, setting aside the penalty and restoring the adjudication order dated 31-3-2009. The requirement of pre-deposit was dispensed with in light of the observations made during the proceedings.