2016 (11) TMI 517 - AT - Service Tax

Imposition of penalty u/s 76, 77 and 78 - Benefit of N/N. 12/2003-ST - invocation of Section 80 - suppression of facts - Held that - specifically the adjudicating authority has exercised his power under Section 80 for non imposition of penalty under Section 78 and it is not a case that since double penalty under Sections 76 and 78 is not imposable, penalty under Section 78 was not imposed - we set aside the impugned Order to the extent of penalties imposed under Section 76 of Finance Act, 1994 and Rule 7C of Service Tax Rules, 1994, under challenge and allow the appeal.

Summary

Issues involved:
- Failure to discharge service tax liability on due dates
- Application of penalties under Section 76 and Rule 7C of Service Tax Rules
- Invocation of Section 80 for non-imposition of penalties
- Payment of late fees for delay in filing ST-3 Returns

Analysis:

Issue 1: Failure to discharge service tax liability on due dates
The appellants provided various services but failed to discharge their service tax liability on due dates, as per Section 68 read with Section 66 of the Finance Act, 1994. However, they paid the entire service tax, along with interest, before the issuance of the show cause notice. The Adjudicating Authority acknowledged this fact and held that there was no suppression on the part of the appellants.

Issue 2: Application of penalties under Section 76 and Rule 7C
Penalties under Section 76 of the Finance Act and Rule 7C of Service Tax Rules were imposed on the appellants. The appellants contended that once Section 80 was invoked by the Adjudicating Authority due to a reasonable cause for failure to pay service tax, penalties under Sections 76, 77, and 78 should not be imposed. The Authority had dropped the penalty under Section 78 but imposed penalties under Section 76 and Rule 7C, leading the appellants to challenge these penalties before the Tribunal.

Issue 3: Invocation of Section 80 for non-imposition of penalties
The Counsel for the appellants argued that since Section 80 contains a non-obstante clause and was invoked by the Adjudicating Authority, penalties under Sections 76, 77, and 78 should not be imposed. The Tribunal agreed with this argument, citing the Hon’ble Kerala High Court judgment in a similar case and held that penalties under Section 76 were not warranted as the entire service tax, along with interest, was paid before the issuance of the show cause notice.

Issue 4: Payment of late fees for delay in filing ST-3 Returns
The appellants had filed ST-3 Returns and paid late fees for the delay in filing, which amounted to more than the penalty imposed under Rule 7C of the Service Tax Rules. The Tribunal found that the penalty under Rule 7C was not sustainable in this case, considering the late fees paid by the appellants.

In conclusion, the Tribunal set aside the impugned Order to the extent of penalties imposed under Section 76 of the Finance Act, 1994, and Rule 7C of the Service Tax Rules, 1994, and allowed the appeal based on the arguments presented and legal precedents cited during the proceedings.