2014 (9) TMI 777 - HC - Service Tax

Imposition of penalty - Whether the penalty under sections 76 and 78 of the Act can be imposed simultaneously particularly in view of the fact that there was no evidence/proof to prove the allegations of suppression of fact - Held that - Even if technically, scope of sections 76 and 78 of the Act may be different, as submitted on behalf of the Revenue, the fact that penalty has been levied under section 78 could be taken into account for levying or not levying penalty under section 76 of the Act. In such situation, even if reasoning given by the appellate authority that if penalty under section 78 of the Act was imposed, penalty under section 76 of the Act could never be imposed may not be correct, the appellate authority was within its jurisdiction not to levy penalty under section 76 of the Act having regard to the fact that penalty equal to service tax had already been imposed under section 78 of the Act. This thinking was also in consonance with the amendment now incorporated though the said amendment may not have been applicable at the relevant time - Decided partly in favour of assessee.

Summary

Issues:
1. Imposition of penalty under sections 76 and 78 of the Act simultaneously.
2. Entitlement for protection under section 80 of the Act.
3. Validity of the show-cause notice under section 73(3) of the Finance Act, 1994.

Analysis:

1. Imposition of Penalty under Sections 76 and 78 of the Act:
The appellant, an illiterate farmer running a welding concern, was ordered to pay service tax and penalties after it was discovered that his work fell under service tax provisions. The appellant cleared all dues upon realization. The Tribunal upheld penalties under sections 76 and 78 of the Act, citing suppression of facts. The appellant contended that penalties under both sections cannot be imposed simultaneously. The court referred to a previous case and held that if a penalty under section 78 is imposed, penalty under section 76 need not be levied. As the penalty under section 78 was already imposed, the court decided in favor of the appellant on this issue.

2. Entitlement for Protection under Section 80 of the Act:
The appellant claimed entitlement to protection under section 80 of the Act as the service tax liability was cleared promptly. The Tribunal required the appellant to provide evidence that the requirements of section 80 were met, which the appellant failed to do. The court found no substantial question of law on this issue due to the lack of evidence presented by the appellant.

3. Validity of the Show-Cause Notice under Section 73(3) of the Finance Act, 1994:
The appellant argued that the show-cause notice was invalid under section 73(3) of the Act. However, as this plea was not raised before the Tribunal, the court declined to consider this issue. The appellant's counsel admitted the failure to raise this plea earlier.

In conclusion, the court partially allowed the appeal by ruling in favor of the appellant on the issue of penalty imposition under sections 76 and 78 of the Act. The court did not find merit in the other issues raised by the appellant.