2014 (8) TMI 551 - AT - Service Tax

Penalties under Sections 75A, 76, 77 & 78 - Revenue contends that penalty should have been imposed under Section 75A and Section 76 of the Finance Act, 1994 and penalty should not have been reduced equal to service tax under Section 78 - Erection, Commissioning and Installation service - Held that - Appellant claimed the benefit of SSI exemption which was allowed in the impugned order and it is because of this reason that the amount of service tax came down to ₹ 27,568/-. It is also found that after this impugned order was passed, respondent has not appealed - Respondent obviously is a small scale service provider and has not even filed an appeal against the order confirming the demand and imposition of penalty under Sections 77 & 78 in the impugned order. Under these circumstances, having regard to the facts of the case and also the records, I consider that there is no need for separate penalty under Section 76 in this case in addition to the penalties imposed under Sections 77 & 78 of Finance Act, 1994. Even though Commissioner (Appeals) has not given reasons, I find that a small scale unit need not have to be inflicted with penalties under all these sections. Further I also consider that having regard to the fact that the appellant is a small scale person and in view of the fact that for a period of four years the total demand for service tax comes to ₹ 27,568/- it can be said that provisions of Section 80 can be applied in this case. On this ground also penalties are required to be set aside - Decided against Revenue.

Summary

Issues:
1. Whether the service provided by the respondent is covered under Erection, Commissioning, and Installation service for the purpose of demanding service tax.
2. Whether penalties under Sections 75A, 76, 77, and 78 of the Finance Act, 1994 were correctly imposed and reduced in the original adjudication and subsequent appeal.
3. Whether penalties under Section 76 and Section 78 should have been imposed separately in addition to those under Sections 77 and 78.
4. Whether the penalties imposed on the respondent, a small scale service provider, were justified considering the circumstances and provisions of Section 80 of the Finance Act, 1994.

Analysis:
1. The respondent provided services of installing CNG/LPG kits in vehicles, which were considered by the authorities as falling under Erection, Commissioning, and Installation service for the purpose of service tax. The original adjudicating authority demanded service tax, which was later reduced by the Commissioner (Appeals) to &8377; 27,568/- based on the respondent's claim of the Small Scale Industry (SSI) exemption.

2. The penalties under Sections 75A, 76, 77, and 78 of the Finance Act, 1994 were initially imposed by the original adjudicating authority but were subsequently modified by the Commissioner (Appeals). The penalties under Sections 75A and 76 were set aside, and the penalty under Section 78 was reduced to the amount of service tax demanded instead of double the amount. The Revenue appealed, arguing that penalties under Section 75A and Section 76 should not have been reduced.

3. The Tribunal considered the arguments presented by the ld. A.R. regarding the imposition of penalties under Section 76, citing relevant case law. The Tribunal acknowledged the merger of Sections 76 and 78 but found that penalties under both sections need not be imposed separately. The Tribunal emphasized that the respondent, being a small scale service provider, had not appealed against the original order confirming the demand and penalties under Sections 77 and 78. Considering the circumstances and the fact that the total demand for service tax was only &8377; 27,568/- for a four-year period, the Tribunal upheld the Commissioner (Appeals)'s decision to set aside the penalties under Sections 76 and 78.

4. The Tribunal concluded that penalties under Section 76 need not be imposed separately in addition to those under Sections 77 and 78, especially for a small scale unit like the respondent. The Tribunal applied the provisions of Section 80 of the Finance Act, 1994, and determined that penalties should be set aside in consideration of the circumstances of the case. Ultimately, the Tribunal upheld the decision of the Commissioner (Appeals) and rejected the Revenue's appeal, emphasizing the leniency warranted for small scale service providers in such cases.