2014 (9) TMI 748 - AT - Service Tax

Imposition of penalty - Whether the appellant herein is correct in claiming that the amount of penalty of 25% of tax liability paid by him is sufficient penalty or not - Held that - appellant has discharged entire service tax liability and interest thereof prior to issuance of show cause notice. It is also undisputed that appellant had paid 25% of the total tax amount as penalty under the provisions of section 78 of Finance Act, 1994 before expiry of 30 days of the order-in-original - appellant has vehemently urged that under Section 73 read with sub-section (1A) of the Finance Act, once show cause notice has been issued then the assessee is required to make payment of penalty. He has further argued that even before the issuance of show cause notice if the Service Tax and interest has been deposited by the assessee, still he would require to deposit the penalty as he would have known as to what penalty would be levied on the assessee, therefore, at least he should have deposited the 25% of the penalty amount within thirty days. - neither any penalty was levied by the appellant nor any quantum of penalty was fixed. Therefore, the assessee has not committed any illegality in not depositing any penalty amount - penalty levied against the assessee in excess of 25% under Sections 76 and 78 of the Finance Act, 1994, has rightly been set aside by the Tribunal. We do not find any illegality in the order of the Tribunal - Decided against the revenue.

Summary

Issues:
1. Whether the appellant's claim of 25% penalty of tax liability as sufficient penalty is correct.
2. Whether imposition of simultaneous penalty under Sections 76 and 78 of the Finance Act, 1994 is justified.

Analysis:

Issue 1:
The appellant contended that they paid the entire service tax liability and interest before the show cause notice was issued. They further argued that paying 25% penalty under Section 78 was sufficient, citing a High Court judgment. The departmental representative disagreed, citing a different case to support imposing penalties under both Sections 76 and 78. The judge noted the undisputed facts of the case, where the appellant indeed paid the full tax liability and 25% penalty before the deadline. Referring to the High Court judgment, the judge ruled in favor of the appellant, setting aside the penalty imposed beyond 25% of the tax liability.

Issue 2:
The departmental representative argued for imposing penalties under both Sections 76 and 78 based on a Tribunal decision regarding amendments to Section 78. However, the judge found this argument irrelevant to the current case's factual context. The judge allowed the appeal and set aside the impugned order challenged before the Tribunal, emphasizing that the previous Tribunal decision did not align with the circumstances of this case.

In conclusion, the appeal was allowed, and the impugned order was set aside to the extent challenged before the Tribunal, based on the High Court judgment supporting the appellant's claim of 25% penalty sufficiency. The judge dismissed the departmental representative's reliance on a different Tribunal decision, emphasizing its inapplicability to the present case.