2017 (10) TMI 704 - AT - Service Tax

Simultaneous Penalty u/s 76 and 78 - outdoor catering service - bonafide belief - Held that - In various judgments, it has been held that the penalties under both section 76 as well as section 78 cannot be imposed simultaneously and the same was brought into effect by amendment to the sections with effect from 10.5.2008 - In the present case, the demand is made for the period from 6.10.2005 onwards where the services came to be taxable. The appellant has already deposited the service tax along with interest as well as 25% of the penalty - the penalty imposed u/s 76 is unwarranted - demand of service tax, interest thereon and the 25% reduced penalty u/s 78 upheld - appeal allowed in part.

Summary

Issues:
Demand of service tax on outdoor catering service, imposition of penalties under sections 76, 77, and 78 of the Finance Act, applicability of penalties under sections 76 and 78 simultaneously.

Analysis:

The case involved a show cause notice issued to the appellant for demanding service tax on outdoor catering service for a specific period. The original authority confirmed the demand of service tax along with interest and imposed penalties under sections 76, 77, and 78 of the Finance Act. The appellant, being aggrieved, filed an appeal before the Commissioner (Appeals), who upheld the order, leading to the current appeal before the tribunal.

During the proceedings, the appellant's consultant argued that the appellant was running a canteen for the benefit of employees and not a catering service. It was contended that the penalties should be set aside due to the appellant's genuine belief that the activity did not fall under 'outdoor catering service.' The consultant further highlighted that penalties under sections 76 and 78 were imposed simultaneously, which was unsustainable, especially considering the new tax regime effective from a specific date.

The Assistant Commissioner reiterated the findings in the impugned order, leading to a hearing where both sides presented their arguments. The consultant for the appellant informed the tribunal that the appellant had paid the entire service tax, interest, and 25% of the penalty imposed under section 78. It was argued that penalties under sections 76 and 78 could not be imposed simultaneously, as per various judgments and amendments to the sections. Considering the circumstances, the tribunal held that the penalty under section 76 was unwarranted and set it aside while upholding the demand for service tax, interest, and the reduced penalty under section 78.

Ultimately, the tribunal partly allowed the appeal by setting aside the penalty under section 76, maintaining the demand for service tax, interest, and the 25% reduced penalty under section 78. The operative portion of the order was pronounced in open court, concluding the case.