2016 (3) TMI 717 - AT - Service Tax

Imposition of penalty - Section 77(1)(a) of the Finance Act, 1994 - Failure to take service tax registration - Penalty imposed of ₹ 200/- per day till the date of payment of tax under Section 77(1)(a) but as per amended provisions the penalty of ₹ 200/- per day has been deleted instead the maximum penalty of ₹ 10,000/- was prescribed - Held that - the amended Section came into effect from 10.5.2013 and the SCN was issued on 8.1.2014. Therefore, the amended Section 77 (1) (a) is applicable and maximum penalty is imposable is ₹ 10,000/-. Imposition of equivalent penalty - Section 78 of the Finance Act, 1994 - Entitlement for reduced penalty of 25% which is paid within 30 days from the date of communication of the OIO as per second proviso of Section 78 of the Finance Act as OIO received on 6.6.2014 and the 30th day falls on 6.7.2014 which was being Sunday and appellants have paid the entire service tax along with interest and reduced penalty on Monday 7.7.2014, the next working day - Held that - the certificate issued by City Union Bank dt.11..7.2014 certifies that DD ws issued in favour of Asst. Commissioner of Central Excise and Service Tax payable at Thanjavur on 05.07.2014. The 30th day i.e. 6.7.2014 being Sunday, so as per the General Clauses Act, the next working day, is to be considered as relevant date for payment purpose. Accordingly, appellants have deposited within 30 days from the date of receipt of OIO the entire service tax, interest and reduced penalty and complied the provisions of Section 78 of Finance Act and therefore, eligible for the reduced penalty as envisaged in the second proviso to Section 78 i.e. 25% which is already paid. - Decided partly in favour of appellant

Summary

Issues Involved:
1. Penalty imposed under Section 77 (1) (a) of the Finance Act,1994 for failure to take service tax registration.
2. Equivalent penalty under Section 78 of the Finance Act,1994.

Analysis:

Issue 1: Penalty under Section 77 (1) (a) for failure to take registration:
The appellant argued that the penalty imposed by the adjudicating authority was incorrect as it invoked the pre-amended Section 77 (1) (a), which prescribed a penalty of Rs. 200 per day till the payment of tax. However, the appellant contended that the amended Section 77 (1) (a) from 10.5.2013 set the maximum penalty at Rs. 10,000. The Tribunal held that the penalty should be restricted to Rs. 10,000 as per the amended Section 77 (1) (a) applicable to the case, overturning the lower authorities' decisions based on the pre-amended provision.

Issue 2: Penalty under Section 78 and entitlement to reduced penalty:
Regarding the penalty under Section 78, the appellant claimed entitlement to a reduced penalty of 25% if paid within 30 days from the communication of the order-in-original. The appellant received the order on 6.6.2014, and paid the entire service tax, interest, and reduced penalty on 7.7.2014, which was the next working day after the 30th day. The Tribunal found that the appellant complied with the provisions of Section 78 by paying within the stipulated period, and thus, was eligible for the reduced penalty as per the second proviso of Section 78. The Tribunal set aside the equivalent penalty imposed by the lower appellate authority and restricted the penalty to 25%, which had already been paid by the appellant.

In conclusion, the Tribunal ruled that the penalty under Section 77 (1) (a) should be limited to Rs. 10,000 and the appellant was entitled to the reduced penalty of 25% under Section 78, which had already been paid. Therefore, the appeal was partly allowed based on the above terms.