2016 (5) TMI 902 - AT - Service Tax

Whether the unamended provision of Section 78 according to which 100% penalty or amended provision of Section 78 according to which 50% penalty is applicable in the case where transactions are recorded in the books of the assessee, when the offence was taken place during the period of unamended Section 78. Held that - neither there was any intention to save the tougher provisions of Section 78 of the Act after 8/4/2011, nor Section 38A of the CEA is legally capable of saving the provisions of erstwhile Section 78 of the Act, as Section 78 is not piece of the delegated legislation. Further, the erstwhile Section 78 of the Act does not exist after 8/4/2011 in view of its substitution by new Section 78 of the Act. In the present case, the Principle of Beneficial Construction also does not allow imposition of higher penalty under the provisions of erstwhile Section 78 of the Act. Thus, the imposition of penalty equal to 50% of the Service Tax amount not paid, is found legal and proper. It is found that it was held that there is no saving clause in Section 38A of the Central Excise Act, for saving erstwhile Section 78 of the Finance Act, nor even anything provided in the amended Section 78 regarding the non applicability of the amended provisions in the case pertaining to the period prior to amendment. In such situation amended Section 78 shall clearly apply at the time of Adjudication of the show cause notice. Therefore, no infirmity found in the impugned order hence the same is upheld. As regard assessee s appeal for waiver of 50% penalty imposed under Section 78. It is found that admittedly the assessee have collected the service tax and not deposited to the Government exchequer. They have also not filed return in respect of the transaction for which service tax was collected and not deposited. In this fact, it is a clear case of suppression of fact with intent to evade payment of service tax, therefore no reasonable cause has been shown by the assessee in order to invoke the Section 80. The penalty was rightly imposed under Section 78 by the lower authority which is upheld. - Decided against the revenue

Summary

Issues Involved:
1. Confirmation of Service Tax Demand and Interest
2. Reduction of Penalty under Section 77
3. Reduction of Penalty under Section 78
4. Applicability of Amended Section 78 for Penalty
5. Waiver of 50% Penalty under Section 78
6. Revenue's Appeal against Reduction of Penalty
7. Cross-Objection by Assessee in Revenue's Appeal

Detailed Analysis:

1. Confirmation of Service Tax Demand and Interest:
The Tribunal upheld the confirmation of the demand for Service Tax amounting to ?29,09,226/- along with interest of ?9,84,787/- payable thereon. The appellant had provided taxable services during the period from 2008-09 to 2011-12 but failed to file service tax returns. The appellant paid the service tax and interest during the course of the inquiry.

2. Reduction of Penalty under Section 77:
The penalty imposed under Section 77 of the Act was reduced to ?10,000/- by the Commissioner (Appeals). The Tribunal did not find any specific contention against this reduction, implying acceptance of the reduced penalty.

3. Reduction of Penalty under Section 78:
The penalty under Section 78 was reduced to ?14,54,613/- by the Commissioner (Appeals), which is 50% of the service tax. The Tribunal examined whether the amended Section 78, effective from 8.4.2011, applies to cases where the cause of action arose before this date.

4. Applicability of Amended Section 78 for Penalty:
The Tribunal concluded that the amended Section 78, which provides for a penalty of 50% of the service tax amount, is applicable. The Tribunal noted that there was no saving clause in Section 38A of the Central Excise Act for the erstwhile Section 78. Hence, the new Section 78 should apply at the time of adjudication. The Tribunal cited the case of Commissioner of Central Excise Pune-I Vs. Srikrishna Associate, asserting that the absence of a saving clause means the amended Section 78 is applicable.

5. Waiver of 50% Penalty under Section 78:
The assessee sought a waiver of the 50% penalty imposed under Section 78 by invoking Section 80. However, the Tribunal found that the assessee had collected service tax but did not deposit it with the Government exchequer and did not file returns for the transactions. This constituted suppression of facts with the intent to evade payment of service tax. Therefore, no reasonable cause was shown to invoke Section 80, and the penalty under Section 78 was upheld.

6. Revenue's Appeal against Reduction of Penalty:
The Revenue appealed against the reduction of the penalty from 100% to 50%. The Tribunal dismissed this appeal, stating that the amended Section 78 should apply and that the penalty of 50% was correctly imposed. The Tribunal also found that the judgments cited by the Revenue were not applicable to the present case.

7. Cross-Objection by Assessee in Revenue's Appeal:
The cross-objection by the assessee in the matter of the Revenue's appeal was disposed of along with the dismissal of the Revenue's appeal.

Conclusion:
The Tribunal dismissed both the Revenue's appeal and the assessee's appeal. The penalties and demands as modified by the Commissioner (Appeals) were upheld, confirming the applicability of the amended Section 78 and rejecting the plea for further reduction or waiver of penalties.