2014 (12) TMI 1136 - AT - Service Tax

Penalty u/s 78 - Enhancement of penalty - transmission and distribution of electricity - Notification No. 45/2010-S.T., dated 20-7-2010 - whether the appellant is required to pay revised penalty - Held that - in view of the Notification which exempts service tax upto 21-6-2010, the activity undertaken by them would not have been leviable to service tax at all if the appellant was not to pay the tax with interest and 25% of the penalty. Needless to say that the question of imposition of a revised penalty would not arise in such a situation since it would amount to imposing penalty on assessees who pay the tax as and when demanded with interest without questioning the right to collect and without any delay - Decided in favour of assessee.

Summary

Issues:
1. Penalty imposition under Section 78 of the Finance Act, 1994.
2. Interpretation of Notification No. 45/2010-S.T. regarding service tax exemption.

Analysis:

Issue 1: Penalty imposition under Section 78 of the Finance Act, 1994
The judgment addressed the penalty imposed on the appellant under Section 78 of the Finance Act, 1994. The original adjudicating authority had imposed a penalty of &8377; 3,73,443/-, which was subsequently enhanced to &8377; 4,89,376/-. The appellant had already paid the entire amount of service tax, interest, and 25% of the service tax demanded towards penalty within one month of the order. The Order-in-Revision required the appellant to pay an additional amount of &8377; 1,15,933/-. However, considering the circumstances and the appellant's compliance with payment, the Tribunal set aside the impugned order and allowed the appeal, indicating that imposing a revised penalty in this situation would be unjust.

Issue 2: Interpretation of Notification No. 45/2010-S.T. regarding service tax exemption
The judgment delved into the interpretation of Notification No. 45/2010-S.T., dated 20-7-2010, concerning the exemption of service tax on taxable services related to transmission and distribution of electricity. The notification specified that service tax need not be paid for services provided up to 21-6-2010. The Tribunal highlighted that the service tax was not leviable if it was not collected during the relevant period. In the case at hand, the service tax had been levied and collected, leading to the question of whether the appellant should pay a revised penalty. The Tribunal emphasized that as per the notification exempting service tax until 21-6-2010, the activity undertaken by the appellant would not have been subject to service tax if the appellant had not paid the tax along with interest and 25% of the penalty. Consequently, the Tribunal concluded that imposing a revised penalty in such circumstances would be unfair, as it would penalize assessees who promptly pay the tax upon demand without contesting the collection. Therefore, the impugned order was set aside, and the appeal was allowed based on this interpretation.

This comprehensive analysis of the judgment provides insights into the issues of penalty imposition and the interpretation of relevant notifications, showcasing the Tribunal's reasoning and decision-making process.