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2017 (3) TMI 1510 - AT - Service TaxPenalty u/s 78 - Option of payment of reduced 25% penalty - Whether penalty imposed u/s 78 of the FA, 1994 can be reduced to 25% by invoking the provisions of first proviso to Section 78, when the assessee has not paid 25% of the penalty amount within 30 days of the order as required under the second proviso to Section 78 ibid - Held that - Since the amount of duty was already paid even before issuance of SCN, we find that direction to deposit 25% of the penalty amount in terms of the second proviso to Section 78 is fair, reasonable and meets the ends of justice - in an identical situation the Hon ble Punjab & Haryana High Court, in the case of COMMISSIONER OF CENTRAL EXCISE, LUDHIANA Versus M/s CITY CABLES 2011 (11) TMI 65 - PUNJAB AND HARYANA HIGH COURT where on similar issue, benefit was extended - Respectfully following the above judgment of Hon ble Punjab & Haryana High Court, which is the jurisdictional High Court, the amount of penalty is reduced to 25% - appeal allowed - decided in favor of assessee.
Issues:
Appeal against penalty imposed on appellants under Section 78 of the Finance Act for service tax liability on Business Auxiliary Services received from overseas commission agent. Analysis: 1. The appellants contested the penalty imposed on them, not the service tax liability. The Adjudicating Authority confirmed a demand of &8377; 11,71,092/- along with interest, and imposed a penalty under Section 78. The appellants had already deposited &8377; 13,36,010/- towards their service tax liability. In the appellate proceedings, the demand was reduced to &8377; 8,00,432/-, and the penalty was also reduced to the same amount. 2. The appellant's advocate argued that the penalty was unjustified as they had maintained accurate records, provided required information promptly, and paid the service tax and interest before the show cause notice. The advocate cited various case laws to support the appellant's position, seeking the benefit of reduced penalty @25%. 3. The Revenue argued that the penalty was justified due to the appellants' failure to register for service tax, discharge the tax liability, or file statutory returns on time. The appellants only complied after the investigation began, indicating willful suppression. The Revenue cited case laws to support their argument. 4. The Tribunal found that the appellants did not contest their service tax liability but disputed the penalty under Section 78. Despite receiving services from an overseas agent without registration or timely tax payment, the appellants cooperated after the investigation started and paid the tax and interest early. The Tribunal noted that short payment of tax warranted the penalty under Section 78. 5. While acknowledging conflicting judgments on penalty concession, the Tribunal relied on a High Court decision to reduce the penalty to 25% of the service tax amount. The appellants consented to this reduction and agreed to adjust the penalty from the excess amount paid. The Tribunal directed the Revenue to verify the excess payment and collect the penalty accordingly. 6. Following the High Court's decision, the Tribunal reduced the penalty to 25% of the service tax amount. The appellants' consent to this arrangement allowed for adjusting the penalty from the excess payment made. The appeal was disposed of accordingly. This detailed analysis covers the issues raised in the appeal against the penalty imposed on the appellants for their service tax liability related to Business Auxiliary Services received from an overseas commission agent.
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