2008 (10) TMI 119 - AT - Service Tax

Penalty - non payment of service tax on the cable operator services - Commissioner in exercise of his power u/s 84 has enhanced the penalty - penalty under Section 78 is also mandatory and appellants have not made out a case for exercise of discretionary power u/s 80 - penalty of Rs.39,692/- u/s 78 imposed is upheld but appellants shall be liable to pay only 25% of the penalty, if they make the payment within 30 days from the date of communication of this order, as provided u/s 78

Summary

Issues:
1. Imposition of penalty under Section 76 of the Finance Act, 1994.
2. Imposition of penalty under Section 78 of the Finance Act, 1994.

Issue 1: Imposition of penalty under Section 76 of the Finance Act, 1994:

The appellant, engaged in providing cable operator service, received a show cause notice for non-payment of service tax for the period from March 2003 to September 2004. The Assistant Commissioner initially imposed a nominal penalty, but the Commissioner enhanced the penalty under Section 84 of the Finance Act, 1994. The appellant argued that penalty under Section 76 is discretionary, and they were not intentionally evading service tax due to a dispute with another party. The Joint CDR contended that the appellants were aware of their tax liability and suppressed certain charges. The Commissioner upheld the penalty of Rs. 39,692 under Section 76, as the delay was significant, and discretionary power could only be exercised under Section 80, which the appellants failed to establish entitlement to.

Issue 2: Imposition of penalty under Section 78 of the Finance Act, 1994:

The judgment referred to a Supreme Court case regarding Section 11AC of the Central Excise Act, similar to Section 78 under the Finance Act, 1994, stating that penalty under Section 78 is mandatory unless a certain percentage of duty, interest, and penalty have been paid. The Commissioner's enhancement of the penalty was discussed, and it was noted that the proviso under Section 78 did not mention the Commissioner but only Commissioner (Appeals) and Appellate Tribunals or courts. Therefore, the appellants were liable to pay only 25% of the penalty of Rs. 39,692 under Section 78 if paid within 30 days of the Tribunal's order, as per the provisions of the Finance Act, 1994.

In conclusion, the judgment upheld the penalties imposed under both Section 76 and Section 78 of the Finance Act, 1994, based on the appellant's awareness of their tax liabilities and the significant delay in payment. The detailed analysis provided clarity on the legal provisions and the specific circumstances of the case, leading to a comprehensive decision by the tribunal.