2017 (8) TMI 1051 - AT - Service Tax

Penalty u/s 76 and 78 - entire amount of service tax alongwith interest had been paid prior to issuance of the SCN - Held that - penalty both under Section 76 and 78 of the Finance Act, 1994 cannot be imposed simultaneously, in view of the judgement of Hon ble Gujarat High Court in Raval Trading Company Vs. Commissioner of Service Tax 2016 (2) TMI 172 - GUJARAT HIGH COURT - Further, the appellant are entitled to discharge 25% of the penalty imposed under Section 78 of the Finance Act, 1994 subject to fulfilment of the conditions laid down thereunder - the impugned order is modified to the extent of setting aside imposition of penalty under section 76 and allowing the benefit of discharging 25% of the penalty imposed under Section 78 of the Finance Act, 1994 - appeal allowed - decided partly in favor of appellant.

Summary

Issues:
Penalty under Section 76 & 78 of the Finance Act, 1994 - Imposition of penalties simultaneously - Suppression of facts - Payment of service tax - Liability for service tax on GTA Service - Benefit of discharging penalty under Section 78.

Analysis:
The judgment involves two appeals against orders confirming penalties under Section 76 & 78 of the Finance Act, 1994. The appellant argued that penalties under both sections cannot be imposed simultaneously, citing a judgment of the Hon'ble Gujarat High Court. The appellant contended that since there was no suppression of facts and the service tax amount was paid before the issuance of the show-cause notice, the penalty under Section 78 should be set aside. Additionally, the appellant claimed that they were entitled to the benefit of discharging 25% of the penalty imposed under Section 78, which was not extended by the authorities below.

The Revenue argued that the appellant suppressed facts regarding service tax liability, as the process of payment commenced only after the issuance of summons to the Authorized Signatory, despite registration being granted in 2008. The Revenue contended that penalties under sections 76 and 78 were warranted due to this suppression of facts.

The Tribunal noted that the appellant, a manufacturer of Readymade Garments & Made ups, had paid freight charges to a goods transport agency but failed to discharge the service tax until 2011, despite obtaining registration in 2008. The appellant claimed the non-payment was due to a bonafide misconception of the law, which they rectified by paying the service tax with interest upon initiation of recovery proceedings by the department. The Tribunal held that while the appellant's argument that no penalty should be imposed was not valid, penalties under both Section 76 and 78 could not be imposed simultaneously, in line with the Gujarat High Court judgment. The Tribunal modified the order, setting aside the penalty under Section 76 and allowing the appellant to discharge 25% of the penalty imposed under Section 78, subject to fulfilling the specified conditions.

In conclusion, the Tribunal disposed of the appeal by modifying the impugned order, setting aside the penalty under Section 76 and granting the appellant the benefit of discharging 25% of the penalty imposed under Section 78, subject to fulfillment of conditions.