2009 (1) TMI 170 - AT - Service Tax

The Commissioner revised the order of the original authority in exercise of powers vested in him under Section 84 of the Act and enhanced the penalty held that the revision order was passed when the appeal filed by the appellants against the order of the original authority imposing penalties on them was pending before Commissioner of Central Excise (Appeals). The impugned order enhanced the penalties imposed on the appellants under the same provisions revising penalties imposed by the original authority in exercise of his discretion. The impugned order has therefore been passed contrary to the legal provisions and the case law on the subject. In the circumstances, the impugned order is set aside.

Summary

Issues:
Short-paid service tax under 'Air Travel Agents'; Incorrect taxable value in returns; Intent to evade payment; Lower penalty imposed by original authority; Revision of order by Commissioner; Penalties imposed under Sections 76 and 78 challenged; Bar on Commissioner passing order under Section 84; Appeal pending before Commissioner (Appeals); Enhancement of penalties in revisional order; Legal issue decided in favor of assessee; Sub-section (4) of Section 84 invoked.

Analysis:
The case involved M/s. Leo Travels Pvt. Ltd., Trichy, which short-paid service tax under the category of 'Air Travel Agents' for services provided from April 2003 to September 2003. The original authority noted incorrect taxable value in the returns, suspecting an intent to evade tax. The appellants paid the short-paid amount before adjudication, leading to a lower penalty of Rs.5,000 each under Sections 76 and 78 of the Finance Act, invoking Section 80. The Commissioner revised the order, increasing penalties to Rs.30,125 each, citing evasion intent. The appellants contested these penalties, arguing an appeal was pending before the Commissioner (Appeals), invoking Section 84 to bar the Commissioner from passing orders on penalties.

The legal issue revolved around the Commissioner's power to enhance penalties in revision proceedings, which was challenged by the appellants. Citing precedents like Solomon Foundry and Mani Engineering Works cases, the appellants argued against penalty enhancement. The Tribunal noted that Section 84(4) prohibits the Commissioner from passing orders on issues under appeal before the Commissioner (Appeals). As the impugned order enhanced penalties while the appeal was pending, it contravened legal provisions and precedents. Consequently, the Tribunal set aside the impugned order, allowing the appeal and disposing of the application for waiver of pre-deposit and stay of recovery.

In conclusion, the judgment favored the assessee, emphasizing legal restrictions on the Commissioner's powers regarding penalties when appeals are pending. By invoking Section 84(4) and considering relevant case laws, the Tribunal ruled in favor of the appellants, setting aside the penalty enhancements and upholding the appeal against the revised penalties. The decision highlighted the importance of procedural compliance and legal constraints on authorities in revising penalties under the Finance Act.