2016 (1) TMI 209 - AT - Service Tax

Levy of penalty u/s 76 & 78 - Security Agency Services - appellant is not contesting demand of service tax and interest thereupon, which was already paid by the Appellants - Held that - various High Courts and this Tribunal consistently held that once the penalty under Sec 78 has been imposed, no penalty under Sec 76 can be imposed - the penalty imposed under Sec 76 is set aside, the penalty imposed under Sec 78 is reduced to 25% of ₹ 6,25,118/- subject to its deposit within 30 days from the receipt of this order. The demand of service tax and interest thereupon, which has already been paid and a penalty of ₹ 500/- imposed under Section 75A is upheld. - Decided partly in favor of assessee.

Summary

Issues Involved:
1. Imposition of simultaneous penalties under Sections 76 and 78 of the Finance Act, 1994.
2. Permissibility of allowing the option to pay a reduced penalty of 25% under Section 78 after 30 days of the adjudication order.

Detailed Analysis:

1. Imposition of Simultaneous Penalties under Sections 76 and 78:
The primary issue was whether penalties under both Sections 76 and 78 of the Finance Act, 1994 can be imposed simultaneously. The appellant contested that once a penalty under Section 78 is imposed, no penalty under Section 76 should be imposed. The appellant relied on several judgments to support this position, including Commr. of S.T., Bangalore Vs. Motor World - 2012 (27) S.T.R. 225 (Kar.), Commr. of Cen. Ex., Chandigarh Vs. City Motors - 2010 (19) S.T.R. 486 (P & H), and others. These judgments consistently held that Sections 76 and 78 operate in mutually exclusive areas, and penalty under Section 76 cannot be imposed if a penalty under Section 78 is already imposed.

The Tribunal found that the view taken by various High Courts, including Karnataka, Punjab & Haryana, and others, consistently held that once a penalty under Section 78 is imposed, no penalty under Section 76 can be imposed. Therefore, the Tribunal set aside the penalty imposed under Section 76 as unsustainable.

2. Permissibility of Allowing the Option to Pay Reduced Penalty of 25% Under Section 78:
The second issue involved whether the appellant could be permitted to pay a reduced penalty of 25% under Section 78 if the option was not provided in the adjudication order and the 30-day period had lapsed. The appellant cited judgments such as M/s. Ram Singh Kanda & Sons Vs. Commr. of C. Ex., Ludhiana - 2014-TIOL-2433-CESTAT-DEL and Commr. of Cen. Ex. Vs. Bajaj Travels Limited - 2011 (21) S.T.R. 497 (P & H) to argue that the benefit of a reduced penalty could be extended at a subsequent stage.

The Tribunal noted conflicting views between the Bombay High Court in CCE, Raigad Vs. Castrol India Limited - 2012 (286) E.L.T. 194 (Bom.) and the Punjab & Haryana High Court in Commr. of Cen. Ex. Vs. Bajaj Travels Limited. However, the Supreme Court upheld the Punjab & Haryana High Court's decision in Bajaj Travels Limited, stating that if the tax and interest were paid before the adjudication order, the reduced penalty could be allowed.

Respectfully following the Supreme Court's order, the Tribunal held that the appellant is entitled to pay a reduced penalty of 25%, provided it is paid within 30 days from the receipt of the Tribunal's order.

Conclusion:
1. The penalty imposed under Section 76 was set aside based on consistent judgments from various High Courts that once a penalty under Section 78 is imposed, no penalty under Section 76 can be imposed.
2. The penalty under Section 78 was reduced to 25% of Rs. 6,25,118/-, subject to payment within 30 days from the receipt of the Tribunal's order. The demand for service tax, interest, and a penalty of Rs. 500/- under Section 75A was upheld. The appeal was partly allowed in these terms.