2009 (2) TMI 38 - AT - Service Tax

Dispute Resolution Scheme - short-paid tax - as per order issued by designated authority assessee made payment towards full and final settlement of tax arrears under Dispute Resolution Scheme - as per the Scheme (DRS) 2008 any pending appeal shall stand withdrawn once the arrears of service tax, penalty, interest etc are paid in terms of the scheme and a certificate issued by the designated authority in terms of S. 96(2) of the Finance Act, 2008 therefore, appeal is dismissed as withdrawn

Summary

Issues:
1. Reduction of penalty imposed under Section 76 of the Finance Act, 1994.
2. Compliance with the Dispute Resolution Scheme, 2008.

Analysis:

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

The impugned order affirmed a demand of service tax from the respondents under the head "Clearing & Forwarding Agents" for the period May 2001 to March 2003. The respondents partially paid the due amount before the Department initiated proceedings to recover the remaining tax. Penalties were imposed under Sections 75A, 76, and 77 of the Act. The Commissioner (Appeals) modified the penalty under Section 76 to Rs.2,000, considering confusion during the relevant period, part payment made by the respondents, and a Tribunal decision. The Revenue challenged this reduction citing a High Court judgment stating that if a reasonable cause is not shown, the minimum prescribed penalty cannot be further reduced. The Tribunal upheld the reduction but later realized that the penalty could only be Rs.100 or Rs.200 per day under Section 76. Thus, the case was recalled for reconsideration.

Issue 2: Compliance with the Dispute Resolution Scheme, 2008

The respondents paid the arrears of service tax, penalties, and interest as per the impugned order. They also submitted a certificate for full settlement of tax arrears under the Dispute Resolution Scheme, 2008. The certificate granted them immunity from penalty imposition for matters covered in the declaration. The Ministry of Finance's scheme stated that pending appeals would be withdrawn upon full payment and issuance of the designated authority's certificate. As the respondents had paid all dues without seeking any relief under the scheme, the appeal was dismissed as withdrawn under the Dispute Resolution Scheme.

In conclusion, the judgment addressed the reduction of penalties under Section 76 of the Finance Act, 1994, emphasizing the statutory limits on penalty imposition. Additionally, it highlighted the respondents' compliance with the Dispute Resolution Scheme, resulting in the dismissal of the appeal due to full payment and immunity granted under the scheme.