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2016 (2) TMI 172 - HC - Service TaxLevy of penalty u/s 78 - delayed payment of service tax due to financial hardship - Extended period of limitation - Held that - The explanation offered by the assessee was not accepted. It was the case of the assessee that unaware of the tax liability, the service tax was not deposited with the department. Had this been the case, the assessee would have surely pleaded that such service tax was never collected from the service recipient. The defence that due to financial hardship such service tax was not paid would firstly destroy the assessee s case of ignorance of service tax liability. - Levy of penalty confirmed. Simultaneous penalties under Sections 76 and 78 - Held that - we answer the additional question in favour of the appellantassessee and delete the penalty under Section 76 of the Finance Act, 1994, while upholding the penalty imposed under Section 78 and other penalties. - Decided in favor of assessee.
Issues Involved:
1. Imposition of penalties under Sections 76 and 78 of the Finance Act, 1994. 2. Legality of issuing notice under Section 73Q of the Finance Act, 1994 beyond the period of one year without findings of fraud, collusion, willful misstatement, suppression of fact, or contravention with intent to evade payment of service tax. 3. Whether simultaneous penalties under Sections 76 and 78 of the Finance Act, 1994 can be imposed. Detailed Analysis: 1. Imposition of Penalties under Sections 76 and 78 of the Finance Act, 1994: The appellant, a partnership firm engaged in marketing and selling offset printing machines, failed to deposit service tax for the period between 09.07.2004 and 31.03.2006. After an investigation, the firm paid the tax with interest in November 2006. A show-cause notice was issued on 09.05.2007 for appropriating the deposited amount towards service tax liability and imposing penalties under Sections 76 and 78 of the Finance Act, 1994. The adjudicating authority imposed penalties, stating the firm was liable for service tax under business auxiliary services, and the tax was paid only after detection by the intelligence wing. The appellate authority and the Customs Excise and Service Tax Appellate Tribunal upheld this decision, noting the firm's deliberate non-payment and suppression of facts. The court confirmed the penalty under Section 78, rejecting the firm's defense of ignorance and financial hardship, noting the firm's failure to obtain registration with the Sales Tax Department. 2. Legality of Issuing Notice under Section 73Q Beyond One Year: The court did not explicitly address the issue of the legality of issuing notice under Section 73Q beyond the period of one year without findings of fraud, collusion, willful misstatement, suppression of fact, or contravention with intent to evade payment of service tax. The focus remained on the imposition of penalties under Sections 76 and 78. 3. Simultaneous Penalties under Sections 76 and 78: The appellant contended that simultaneous penalties under Sections 76 and 78 should not be imposed. Section 78, as amended from 16.05.2008, included a proviso stating that if a penalty is payable under Section 78, the provisions of Section 76 shall not apply. The court agreed that this amendment was clarificatory and applicable to cases prior to its enactment. The court highlighted that Section 78 pertains to penalties for tax evasion due to fraud, collusion, or willful misstatement, whereas Section 76 covers non-payment of tax for any reason. The court concluded that the proviso to Section 78 clarified that simultaneous penalties under both sections are not permissible. This view was supported by judgments from the Punjab and Haryana High Court and the Karnataka High Court, which held that penalties under Section 76 should not be imposed if a penalty under Section 78 has already been levied. The court deleted the penalty under Section 76 while upholding the penalty under Section 78. Conclusion: The court confirmed the penalty under Section 78 of the Finance Act, 1994, and deleted the simultaneous penalty under Section 76, recognizing the clarificatory nature of the amendment to Section 78. The appeal was disposed of with no order as to costs.
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