2017 (8) TMI 1177 - AT - Service Tax

Penalty u/s 78 - Renting of Immovable Property service - Held that - by respectfully following the precedence set by the Hon ble CESTAT, the jurisdictional appellate forum, I hold that penalty under Section 78 is not imposable on the appellants - reliance has been placed in the case of Sankarankoil Municipal Corporation (vide OIA No.TNL-CEX-000-APP-078-14, dated 07.08.2014) - appeal dismissed - decided against Revenue.

Summary

Issues: Appeal against waiver of penalty under Section 78 of the Finance Act, 1994.

Analysis:
The case involved an appeal filed by the Revenue against the order of the Commissioner (Appeals) granting waiver of penalty imposed under Section 78 of the Finance Act, 1994 to the Municipal Commissioner. The issue revolved around the Municipality's liability to pay service tax for Renting of Immovable Property service. The original adjudicating authority had imposed penalties under Section 77 and Section 78 of the Central Excise Act. The Commissioner (Appeals) partly allowed the appeal by waiving the penalty under Section 78 but upheld other demands. The Revenue challenged the waiver of penalty before the CESTAT, arguing that the Municipality should be penalized as per the provisions of the Act.

Upon hearing the arguments, the CESTAT examined the observations made by the Commissioner (Appeals) regarding the penalty under Section 78. The Commissioner (Appeals) had considered the Municipality's nature as a local self-government entity working for public welfare and referred to previous cases where penalties were waived for similar entities. Citing CBEC instructions and judicial precedents, the Commissioner (Appeals justified the waiver of penalty. The CESTAT, following its previous decisions in similar cases, upheld the waiver of penalty under Section 78 for the Municipality, emphasizing that public authorities should not be penalized without evidence of malafide intent or fraud.

Despite the Revenue's appeal, the CESTAT found no merit in challenging the waiver of penalty under Section 78 based on the principles established in previous cases. The CESTAT's decision was influenced by the precedence set in earlier cases where penalties were waived for public entities like Municipal Corporations. The CESTAT's order stood firm as there was no stay granted by the High Court, leading to the rejection of the Revenue's appeal. The CESTAT's decision, based on established principles and legal precedents, highlighted the importance of considering the nature and intent of public entities like Municipalities before imposing penalties under Section 78 of the Finance Act, 1994.