2015 (1) TMI 232 - HC - Service Tax

Penalty u/s 76 - Invocation of Section 80 - tax paid during investigation proceedings but before issuance of SCN - Travel agent service - Held that - A careful perusal of the order of the Tribunal would reveal that Reasonable cause as provided under Section 80 of the Act has been recorded by the Tribunal stating that the respondent assessee had fallen into financial crisis on account of the criminal breach of trust committed by their sub-agent and criminal proceedings were initiated against such persons and the same are pending. In addition to the above, the Tribunal also came to hold that it is a case of payment of duty voluntarily at the time of investigation even prior to issuance of show cause notice. Therefore, the Tribunal went on to invoke the provisions of Section 80 of the Act on the ground of reasonable cause. - On a careful consideration of the documents as submitted by parties and also on a careful perusal of the reasoning of the Tribunal, this Court finds that the reasoning of the Tribunal is based on parameters of Section 80 of the Act and, therefore, this Court finds no necessity to interdict the decision of the Tribunal granting relief to the petitioner under Section 76 of the Act by invoking the provisions of Section 80 of the Act - Decided against Revenue.

Summary

Issues:
Challenge to order of Appellate Tribunal by Revenue regarding penalty under Section 76 of Finance Act, 1994.

Analysis:
1. The respondent, a travel agent, was found to have not paid service tax despite starting business in August 2003. Upon inspection, the entire service tax liability was paid before the show cause notice was issued on 27.10.04. The subsequent order imposed penalties under Sections 75-A, 76, and 77 of the Finance Act, 1944. The assessee appealed, leading to a reduction in penalties under Sections 75 and 77, while the penalty under Section 76 was reduced to &8377; 100 per day.

2. The Tribunal, considering precedents, set aside the penalty under Section 76, citing that the service tax was paid before the show cause notice. Notably, no appeal was filed against a similar case, leading to a decision in favor of the assessee. The Revenue challenged this decision, arguing against the application of Section 80 of the Act regarding reasonable cause.

3. The Tribunal justified invoking Section 80 due to the financial crisis caused by a sub-agent's breach of trust, leading to criminal proceedings. Additionally, the voluntary payment of duty before the notice was considered. The High Court upheld the Tribunal's decision, finding no grounds to interfere, thus favoring the assessee.

4. Consequently, the High Court dismissed the appeal, emphasizing no costs to be awarded. The second question of law was deemed academic due to the favorable ruling on the first issue. The decision rested on the application of Section 80 and the circumstances surrounding the voluntary payment of duty before the issuance of the show cause notice.

This detailed analysis highlights the legal journey regarding the challenge to the penalty under Section 76 of the Finance Act, 1994, ultimately leading to the High Court's decision in favor of the assessee based on the application of Section 80 and the specific circumstances of the case.