2018 (12) TMI 860 - AT - Service Tax

Penalty - Demand alongwith interest and penalty appropriated in the adjudication order - Held that - There is no material of miss-statement or willful suppression of fact with an intent to evade payment of Service Tax - Further, the appellant has paid the entire amount of demand of ₹ 11,465/- alongwith applicable interest and 25% of the penalty imposed under Section 78, which has been appropriated in the adjudication order - appeal allowed - decided in favor of appellant.

Summary

Issues:
Demand of service tax, penalties under Section 77 and 78, non-filing of ST-3 Returns, contravention of provisions in Section 69 of the Finance Act.

Analysis:
The case involved an appellant, a small scale manufacturer of excisable goods engaged in job work, facing a demand for service tax amounting to ?2,56,032 along with penalties and interest for discrepancies noticed during audits. The Adjudicating Authority confirmed the demand and imposed penalties under Sections 77 and 78, along with penalties for non-filing of ST-3 Returns and contravention of Section 69 of the Finance Act. The appellant appealed, and the Commissioner (Appeals) modified the order, reducing the demand to ?11,465 and upholding certain penalties. The main contention before the Tribunal was the imposition of penalties under Section 77.

During the proceedings, the appellant's consultant argued that the penalties imposed were excessive, emphasizing that the appellant believed they were exempt due to being a small scale service provider. The Departmental Representative supported the lower authorities' orders. The Tribunal reviewed the records and found that while the demand was reduced by the First Appellate Authority, penalties under Section 77 remained a point of dispute. The Adjudicating Authority had imposed penalties of ?1,000, ?2,74,000, and ?5,000 under Section 77 for different periods. However, upon examination, no willful suppression of facts to evade tax payment was found, and the appellant had paid the reduced demand and part of the penalties.

The Tribunal invoked Section 80 of the Finance Act, 1994, setting aside the penalties of ?1,000, ?2,74,000, and ?5,000 imposed under Section 77, considering the appellant's compliance with the reduced demand and penalties. Consequently, the Tribunal allowed the appeal filed by the appellant, overturning the penalties under Section 77.

In conclusion, the Tribunal's decision focused on the proportionality of penalties imposed under Section 77, considering the appellant's compliance and lack of willful evasion. The judgment clarified the application of statutory provisions and the appellant's genuine belief as a small scale service provider, leading to the setting aside of certain penalties under Section 77.