2018 (9) TMI 393 - AT - Service Tax

Jurisdiction of Commissioner - Commissioner under his revisionary power has issued SCN, imposing penalty, by invoking extended period of limitation - Penalty u/s 76, 77 and 78 of FA - payment of service tax with Interest was made on being pointed out - no intent to evade - Held that - This issue was considered by the Hon ble High Court of Karnataka in the case of Motor World 2012 (6) TMI 69 - KARNATAKA HIGH COURT wherein the Hon ble High Court after considering the scope of revision power of the Commissioner to impose penalty which was dropped by the original authority in exercise of his discretion under Section 80 has finally held that Revisional authority had no jurisdiction to interfere with the said orders as the authority held that there was sufficient cause for non-payment of duty. Therefore, the order passed by the revisionary authority is erroneous and calls for interference. Tribunal in the case of S-Mac Security Services Pvt. Ltd. Vs. CST, Bangalore 2016 (8) TMI 15 - CESTAT BANGALORE , after noting the fact that the service tax along with interest has been voluntarily paid by the appellant before issuance of show-cause notice, has set aside the penalty imposed by Revisionary Authority under Sections 76 to 78. Imposing penalty by exercising revisionary power is not sustainable in law - appeal allowed - decided in favor of appellant.

Summary

Issues involved:
Imposition of penalty under Sections 76, 77, and 78 of the Finance Act, 1994 by the Commissioner through revisionary power under Section 84.

Detailed Analysis:

Issue 1: Imposition of penalty under Sections 76, 77, and 78 by the Commissioner through revisionary power

The appeal was against an order imposing penalties under Sections 76, 77, and a penalty of ?90 lakhs under Section 78 of the Finance Act, 1994. The dispute arose from a show-cause notice demanding service tax and cess for a specific period, which was confirmed by the original authority. The Assistant Commissioner, after finding no deliberate intention to evade payment of service tax, dropped penalties under Sections 76 and 77 but imposed a penalty of ?20,000 under Section 78. The Commissioner, through revisionary power, issued a show-cause notice to revise the order and imposed penalties under all three sections. The appellant contested this, arguing that penalties cannot be imposed without a determination of service tax under Section 73(2), and the revision order went beyond the original proceedings. The High Court's decision in the case of Motor World clarified that penalties under Sections 76 and 78 are mutually exclusive, and the authority cannot impose penalties if there is a reasonable cause for non-compliance, as per Section 80 of the Act.

Issue 2: Interpretation of legal provisions and precedents

The appellant cited various legal precedents to support their argument that the revisionary power under Section 84 cannot be used to enhance penalties without proper justification. The Punjab & Haryana High Court's decision in CCE, Jalandhar Vs. Darmania Telecom emphasized that penalties should not be imposed under Section 78 without evidence of fraud or misrepresentation. The Tribunal's decision in S-Mac Security Services Pvt. Ltd. Vs. CST, Bangalore further supported the appellant's stance by setting aside penalties imposed through revisionary authority when service tax had been paid voluntarily before a show-cause notice was issued.

Conclusion:

After considering the arguments and legal precedents, the Tribunal concluded that the imposition of penalties through revisionary power was not sustainable in law. Citing settled legal positions and precedents, the Tribunal set aside the impugned order, allowing the appeal of the appellant. The decision highlighted the importance of proper determination of service tax, absence of fraud or misrepresentation, and the discretion of authorities in imposing penalties under the Finance Act, 1994.