2008 (10) TMI 175 - AT - Service Tax

Revenue contend that simultaneous penalty u/s 76 and 78 not valid only from 2008 and not during impugned period - Tribunal in the case of The Financers v. CCE Jaipur and CCE Ludhiana v. Silver Oak Gardens Resort has taken a view that simultaneous imposition of penalty u/s 76 and 78 is too harsh and that if the penalty has been imposed u/s 78 separate imposition of penalty under Section 76 is not called for - Commissioner (A) in impugned order upholding penalty u/s 78 but setting aside penalty under sections 76 and 77 is justified

Summary

Issues:
- Stay of operation of order-in-appeal regarding service tax demands and penalties under Sections 76, 77, and 78.
- Interpretation of penalty provisions under Section 76 and Section 78 of the Finance Act, 1994.
- Justification for imposition of penalties under Sections 76 and 77 when service tax, interest, and penalty under Section 78 have been paid.
- Precedents regarding simultaneous imposition of penalties under Sections 76 and 78.

Analysis:
The judgment pertains to applications filed by the Revenue for stay of the operation of orders-in-appeal regarding service tax demands and penalties under Sections 76, 77, and 78 of the Finance Act, 1994. The respondents, real estate agents, had not paid service tax for taxable services provided from 2001-02 to 2003-04, leading to the imposition of penalties by the Deputy Commissioner. The Commissioner (Appeals) upheld the service tax demands and penalty under Section 78 but set aside penalties under Sections 76 and 77. The Revenue challenged the setting aside of penalties under Sections 76 and 77, leading to the present appeals and stay petitions.

Regarding the interpretation of penalty provisions, the departmental representative argued that penalty under Section 76 is warranted if service tax is not paid on the due date, as there was no provision during the relevant period similar to the amendment in the budget of 2008 where penalty under Section 78 negates penalty under Section 76. On the other hand, the respondent's counsel contended that since the service tax, interest, and equal penalty under Section 78 had been paid, there was no justification for penalties under Sections 76 and 77. The counsel relied on precedents where it was held that simultaneous imposition of penalties under Sections 76 and 78 is too harsh.

The Tribunal, after considering the submissions, referred to previous judgments where it was established that penalty under Section 78 is attracted in cases involving mens rea, while penalty under Section 76 is for cases of failure to pay service tax without mens rea. It was emphasized that imposing penalties under both sections for the same evasion is excessive, and if penalty under Section 78 is imposed, there is no need for a separate penalty under Section 76. Consequently, the Tribunal found no justification for staying the impugned orders and dismissed the stay applications filed by the Revenue.

In conclusion, the judgment provides clarity on the interpretation of penalty provisions under Sections 76 and 78, emphasizing the distinction based on mens rea and the inappropriateness of simultaneous imposition of penalties under both sections for the same evasion. The decision highlights the importance of considering previous judgments and legal principles in determining the appropriate penalties in tax evasion cases.