2015 (5) TMI 145 - HC - Service Tax

Wilful suppression of the value of taxable services - Simultaneous Penalty u/s 76 & 78 - Held that - Even when penalty under Section 76 of the Finance Act, 1994 has been imposed, penalty under Section 78 of the Finance Act, 1994 is also imposable. - Tribunal has come to an erroneous conclusion that once penalty is imposed under Section 76 of the Finance Act, 1994, there is no necessity for imposition of penalty under Section 78 of the Finance Act, 1994 - The above view of the Tribunal runs contrary to the law laid down on the subject - Following decision of Dhandayuthapani Canteen - Vs - CESTAT 2015 (1) TMI 812 - MADRAS HIGH COURT - Decided in favour of revenue.

Summary

Issues:
1. Imposition of penalty under Section 78 of the Finance Act, 1994 for wilful suppression of facts to evade service tax.
2. Interpretation of the need for imposition of penalty under Section 78 when service tax demand is sustainable.

Analysis:
1. The appellant, a service provider offering cabs on a rental basis, faced a demand for service tax of Rs. 4,04,132/- along with penalties under various sections of the Finance Act, 1994. The original authority found wilful suppression of taxable services by the appellant, leading to the imposition of penalties. The Commissioner (Appeals) upheld the penalties, but the Tribunal set aside the penalty under Section 78 while directing the payment of interest on delayed tax. The Department contended that penalties under Sections 76 and 78 are mandatory upon wilful suppression, citing the Supreme Court's decision in Union of India v. Dharamendra Textile Processors. The Department argued that discretion is not a factor in imposing penalties.

2. The Supreme Court's rulings in Union of India v. Rajasthan Spinning & Weaving Mills and other cases emphasized the mandatory nature of penalties under Section 78 upon proving wilful suppression. The Court referred to the case of Dhandayuthapani Canteen - Vs - CESTAT, where it was held that penalties under both Sections 76 and 78 can be imposed concurrently. The Court found the Tribunal's conclusion erroneous in not imposing penalties under Section 78 despite penalties under Section 76 being levied. The judgment clarified that the law mandates the imposition of penalties under both sections upon establishing wilful suppression, contrary to the Tribunal's decision.

3. Consequently, the Court ruled in favor of the appellant/Revenue, stating that penalties under both Sections 76 and 78 are applicable when wilful suppression is proven. The Tribunal's decision was deemed incorrect, and the substantial questions of law were answered in favor of the appellant/Revenue. The appeal was allowed, granting the respondent/assessee the opportunity to raise legal objections within the permissible limits of the law, with no costs imposed.

This detailed analysis of the judgment highlights the issues of penalty imposition under the Finance Act, 1994, the legal interpretations provided by the Supreme Court, and the High Court's decision in this particular case.