2018 (9) TMI 1065 - AT - Service Tax

Penalty under Section 78A of the Finance Act, 1994 on employees of the company - case of appellant is that since Section 78A ibid was brought into the statute book on 10th May 2013, penalty cannot be imposed on the employees of the company by invoking the non-existent provisions of Section 78A at the material time. Held that - During the disputed period, Section 78A ibid was not incorporated in the statute and the same was inserted by Finance Act, 2013 with effect from 10th May 2013 - the provisions of Section 78A ibid cannot be invoked for imposition of penalty on the employees for the offence committed by the company - Appeal allowed - decided in favor of appellant.

Summary

Issues: Imposition of penalty under Section 78A of the Finance Act, 1994 on the appellants.

The judgment by the Appellate Tribunal CESTAT Mumbai revolves around the imposition of penalties under Section 78A of the Finance Act, 1994 on the appellants. The appellants argued that the disputed period from 2008 to 2012 did not have provisions for penalties on directors, etc., as Section 78A was inserted in the statute only in 2013. The tribunal acknowledged this, noting that Section 78A was not part of the statute during the disputed period and was added later by the Finance Act, 2013. Citing a similar case precedent, the tribunal held that penalties under Section 78A cannot be imposed on employees for offenses committed by the company. Consequently, the tribunal found no merit in the impugned orders that invoked Section 78A for penalties and allowed the appeals in favor of the appellants.

In essence, the judgment highlights the temporal limitation of statutory provisions and the principle that penalties cannot be retroactively applied based on subsequent legal amendments. It underscores the importance of legal clarity and precision in imposing penalties, ensuring that penalties are aligned with the legal framework in force during the relevant period. The reference to a prior case sets a precedent for interpreting and applying Section 78A in cases involving penalties on employees for company offenses, emphasizing consistency and precedent in legal decisions. The tribunal's decision to set aside the penalties showcases a commitment to upholding legal principles and protecting individuals from retrospective penal consequences.