2016 (10) TMI 458 - AT - Service Tax

Levy of penalty - delay in payment of service tax - appellant had collected the service tax but not deposited the same it time, but deposited before issuance of show cause notice - Held that - the decision of the Hon ble High Court 2016 (2) TMI 174 - GUJARAT HIGH COURT has been given in circumstances where the appellant had not filed the requisite periodical returns and the fact of non-payment of service tax came to light only on the result of special investigation. In the instant case, appellant has been filing regular returns and therefore there could not have been any specific intention to evade duty. In these circumstances, the decision of the Hon ble High Court of Gujarat is distinguishable. - Relying on the decision of the Tribunal in Vista Infotech (2009 (8) TMI 289 - CESTAT, BANGALORE) we hold that the penalty under Section 78 is unwarranted and the same is set aside. - However, penalty under Section 77 is upheld. Decided partly in favor of assessee.

Summary

Issues:
1. Default in payment of duty for two different periods.
2. Imposition of penalty under Sections 76, 77, and 78 of the Finance Act, 1994.
3. Invocation of Section 78 for penalty imposition.
4. Applicability of Section 73(3) in case of voluntary duty payment before show-cause notice.
5. Comparison of the present case with the decision of the Hon'ble High Court of Gujarat in a specific case.
6. Distinction in circumstances between the present case and the case referred to by the High Court.
7. Tribunal's decision on penalty imposition under Section 78 and Section 77.

Analysis:
The judgment dealt with two cases of default in duty payment for different periods. The original adjudicating authority confirmed duty demand, interest, and imposed penalties under Sections 76 and 77 but not under Section 78. The Commissioner (Appeals) upheld the demand, interest, and penalty under Section 77, set aside the penalty under Section 76, and imposed an equivalent penalty under Section 78. The appellant contested the penalty under Section 78, arguing that the requirements for its imposition were not met, and sought the benefit of waiver under Section 80 and the option for reduced penalty under the first proviso to Section 78.

The appellant's counsel argued that since duty was paid voluntarily before the show-cause notice, proceedings should have concluded under Section 73(3) of the Finance Act, 1994. The revenue relied on a High Court decision where non-payment was found to be intentional. The Tribunal noted that in a similar case, when service tax was paid before the notice due to financial constraints, Section 73(3) could be applied. However, the High Court decision cited by the revenue was based on non-filing of returns and intentional non-payment, unlike the present case where regular returns were filed, indicating no specific intent to evade duty.

Therefore, the Tribunal found the penalty under Section 78 unwarranted and set it aside, while upholding the penalty under Section 77. The decision highlighted the distinction in circumstances between the present case and the case referred to by the High Court, leading to the partial allowance of the appeals with respect to penalty imposition.