2017 (8) TMI 439 - AT - Service Tax

Penalty u/s 78 of FA, 1994 - demand was confirmed u/s 73A(4) of the Finance Act, 1994 - Held that - From the above plain reading of the Section 78 it can be seen that penalty under such Section can only be imposed when service tax is determined under Sub-Section (2) of Section 73 - in the present case admittedly the service tax was determined under Section 73A(4) of the Finance Act, 1994. Therefore the penal provisions of Section 78 is consequentially not applicable in the case of demand of service tax determination under Section 73A(4) - demand of tax with interest upheld - penalty set aside - appeal allowed - decided partly in favor of appellant.

Summary

Issues:
1. Imposition of service tax and penalties on the appellant for failure to pay service tax collected from customers.
2. Contention regarding penalty under Section 78 of the Finance Act, 1994.

Analysis:
1. The appellant provided Goods Transport by Road and Rent-a-Cab services from April 2005 to March 2008, collecting service tax but not depositing it with the Government. The adjudicating authority confirmed the service tax amounts and imposed penalties. The appellant contested the penalties, arguing that for the demand related to Goods Transport by Road, the penalty under Section 78 was not applicable as the service tax was determined under Section 73A(4) of the Finance Act, 1994. The appellant cited relevant judgments to support their argument. The Revenue maintained that penalties were justified irrespective of the section under which the service tax was determined.

2. The tribunal analyzed the provisions of Section 73A(4) and Section 78 of the Finance Act, 1994. Section 78 allows penalties for non-payment of service tax determined under Section 73(2), not under Section 73A(4) as in the present case. The tribunal noted that Section 73A(4) was effective from 18.4.2006, applicable to the period in question. Even for the period before its enactment, Section 78 did not apply to service tax not required to be paid but collected inadvertently. Therefore, the tribunal concluded that the penalty under Section 78 was wrongly imposed and set it aside. The tribunal upheld the service tax demand, interest, and penalty under Section 77. The appeal was partly allowed based on these findings.

This detailed analysis of the judgment highlights the issues of service tax imposition and penalties, along with the specific argument and decision regarding the applicability of penalty under Section 78 of the Finance Act, 1994.