2008 (10) TMI 71 - AT - Service Tax

Penalty imposed for non-payment of tax - appellants had discharged entire Service Tax liability before the issue of show cause notice. Therefore there is no justification for enhancing the penalty under Section 78 - Even the other penalties under Section 76 and 77 are not justified.

Summary

Issues:
1. Imposition of penalty under Section 78 of the Finance Act, 1994.
2. Justification for enhancing penalties under Sections 76 and 77 of the Finance Act, 1994.
3. Applicability of penalties in the case of non-discharge of Service Tax liability.

Analysis:
1. The appeal was filed against the Order-in-Revision enhancing the penalty under Section 78 of the Finance Act, 1994. The Assistant Commissioner confirmed Service Tax demands for a specific period and imposed a penalty of Rs. 8,000 under Section 78. However, the Commissioner revised the order, imposing penalties under Sections 76 and 77 as well, and enhanced the penalty under Section 78 to Rs. 4,49,000, nearly 1.5 times the Service Tax liability. The appellant challenged this decision, leading to the appeal (ST/346/2007).

2. The Commissioner, in exercising revisionary powers, set aside the Assistant Commissioner's order of waiving penalties under Sections 76 and 77, imposing penalties at the rate of Rs. 100 per day for failure to make payments under Section 76 and a penalty of Rs. 1000 under Section 77. Citing a decision by the Hon'ble High Court of Rajasthan, the JCDR argued that it is mandatory to impose a penalty equal to the Service Tax evaded. However, the appellant's CA argued that previous tribunal decisions, such as in the case of M/s. Majestic Mobikes Pvt. Ltd. and others, supported a different interpretation, emphasizing that the appellant had discharged the entire Service Tax liability before the show cause notice.

3. Upon careful consideration, the Tribunal found that the appellants had indeed paid the Service Tax liability before the issuance of the show cause notice. Relying on the precedent set by the case of M/s. Majestic Mobikes and the decision in CCE, Bangalore Vs. M/s. Prompt & Smart Security, the Tribunal concluded that there was no justification for enhancing the penalties under Sections 76, 77, and 78. Therefore, the Tribunal allowed the appeal, setting aside the penalties imposed by the Commissioner.

This judgment highlights the importance of considering the timing of tax payments and the justification for penalties in cases of non-discharge of tax liabilities before issuing show cause notices.