2008 (11) TMI 131 - AT - Service Tax

Issue of levy of service tax on GTA services for the period 16-11-1997 to 1-6-1998 was finally settled by decision f SC in the case of Gujarat Ambuja Cement Ltd which required the respondent to pay tax within two weeks from the date of the order of SC - However, the respondents paid the entire service tax involved along with applicable interest within 1 months from the date of the order since assessee paid tax with interest within reasonable time, penalty u/s 77 and 78 cannot be imposed

Summary

Issues:
Dispute over levy of service tax on GTA services for a specific period. Imposition of penalties under sections 77 and 78 of the Finance Act, 1994. Applicability of penalty for delay in payment of tax under section 76 of the Act. Consideration of payments made by the appellants towards interest liability and tax liability. Lack of notice for penalty imposition under section 76. Justification for penalty imposition under sections 77 and 78.

Analysis:
The case involved two appeals by the Department against the order of the Commissioner (Appeals) regarding the penalties imposed under sections 77 and 78 of the Finance Act, 1994. The dispute revolved around the levy of service tax on GTA services for a specific period, which was resolved by the judgment of the Hon'ble Supreme Court in a previous case. The respondents paid the entire service tax along with interest within a reasonable time after the Supreme Court's order. The Commissioner (Appeals) set aside the penalties based on the circumstances, stating that there was no legal basis to consider the payments made by the appellants towards interest liability first and then towards tax liability.

The Commissioner (Appeals) highlighted that there was no provision in the Central Excise Act/Rules to prioritize payment towards interest liability before tax liability. Additionally, it was noted that no penalty could be imposed under section 77 for delay in payment of tax as the relevant section 71A was not mentioned during the period in question. Although penalty under section 76 for delay in payment of tax was considered, it was deemed inapplicable due to the absence of a notice issued to the appellants. Moreover, considering the overall dispute regarding taxation on GTA services and the timely payment of tax and interest by the appellants, the Commissioner (Appeals) found no justification for imposing penalties under sections 77 and 78.

The Tribunal upheld the decision of the Commissioner (Appeals), emphasizing that the settlement of the service tax issue by the Supreme Court and the subsequent timely payment by the appellants rendered the imposition of penalties unjustified. Therefore, the appeals were rejected, and the cross-objections were disposed of accordingly. The Tribunal found no grounds to interfere with the order of the Commissioner (Appeals) based on the circumstances and legal considerations presented during the proceedings.