2015 (1) TMI 43 - AT - Service Tax

Penalty u/s 76 & 78 - Commercial Training and Coaching services - Held that - Appellant is not agitating the issue on merits but has claimed non-imposition of penalty under Section 76 of the Finance Act, 1994. The entire amount of service tax along with interest was paid before the issue of show cause notice dated 27.7.2011. 25% of the Section 78 penalty was also paid by the appellant on 25.2.2013, within one month from the date of order-in-original (29.01.2013). The issue therefore left in these proceedings is whether Section 76 penalty required to be imposed upon the appellant when Section 78 penalty to the extent of 25% is paid within one month from the date of order-in-original. penalty in excess to 25% cannot be imposed upon the appellant. Accordingly, appeal filed by the appellant is allowed to the extent that penalty in excess to 25% of the Section 78 penalty is not imposable - Decided partly in favour of assessee.

Summary

Issues involved:
- Payment of service tax on Commercial Training and Coaching services during 2006-07.
- Imposition of penalty under Section 76 of the Finance Act, 1994.

Analysis:

Issue 1: Payment of service tax on Commercial Training and Coaching services during 2006-07
The appellant filed an appeal regarding the payment of service tax on Commercial Training and Coaching services provided during 2006-07. The appellant's representative argued that the entire service tax, along with interest, was paid before the issuance of the show cause notice. Additionally, 25% of the penalty under Section 78 was also deposited within one month of the adjudication order. The appellant relied on a decision by the Hon'ble Gujarat High Court to support the argument that once the 25% penalty is paid within the specified time frame, no further penalty should be imposed. On the other hand, the Revenue representative contended that despite the payment of 25% penalty, penalty under Section 76 was still applicable before the amendment of Section 78 in 2008. Various case laws were cited by both sides to support their arguments.

Issue 2: Imposition of penalty under Section 76 of the Finance Act, 1994
After hearing both parties and reviewing the case records, it was noted that the appellant did not contest the issue on merits but sought non-imposition of penalty under Section 76. The appellant had paid the entire service tax and interest before the show cause notice was issued and had also paid 25% of the Section 78 penalty within the stipulated time frame. The question at hand was whether the penalty under Section 76 should be imposed when 25% penalty under Section 78 was paid promptly. The Tribunal referred to relevant case laws and observed that the judgment of the jurisdictional Gujarat High Court was not previously considered. The Tribunal agreed with the view taken in a previous case and held that the penalty in excess of 25% could not be imposed on the appellant. Consequently, the appeal filed by the appellant was allowed to the extent that penalty exceeding 25% of the Section 78 penalty was deemed non-imposable.

In conclusion, based on the legal analysis and the precedent set by the jurisdictional High Court, the Tribunal dismissed the Tax Appeal, affirming that the penalty beyond 25% under Sections 76 and 78 of the Finance Act, 1994, was rightly set aside. The judgment highlighted the importance of timely payment of penalties and the legal implications surrounding the imposition of penalties in cases of service tax liabilities.