2019 (1) TMI 324 - HC - Service Tax

Simultaneous Penalty u/s 76 and 78 of FA - Non-payment of Service Tax - Commercial construction Services - tax alongwith interest and part penalty paid before adjudication - Held that - Various High Courts had taken conflicting views in the question of simultaneous penalties under Section 76 and Section 78. The petitioner s view is supported in as much as the Act itself got amended at a later date to the effect that both penalties cannot be imposed simultaneously. Therefore, in all fairness the penalty imposed under Section 76 of the Act is liable to be set aside. The entire tax along with interest and penalty at 25% of tax demand is paid immediately upon issue of SCN and before Adjudication. So some leniency is warranted in the case. The case was adjudicated on 20.06.2008. The entire demand was paid on 12.05.2008. The interest and penalty at 25% of the demand were paid on 19.07.2008. Therefore, all the dues came to be paid before one month of the date of issue of the adjudication Order. Penalty imposed under Section 76 of the Finance Act, 1994 is liable to be set aside - the payment of the full demand along with interest and the payment of penalty @ 25 % of the duty demanded within/before 30 days of the issue of OIO discharges the petitioner of all the obligations cast upon him under the law - petition allowed in part.

Issues:

1. Service tax liability for commercial construction services provided to HPCL between February 2005 and March 2007.
2. Imposition of penalty under Sections 76 and 78 of the Finance Act, 1994.
3. Request for amendment to the Adjudication Order based on payment made before determination of taxes.
4. Rejection of application for rectification of mistake under Section 74 of the Finance Act, 1994.
5. Appeal before Commissioner Appeals and CESTAT regarding delay in filing appeal.
6. Consideration of statutory remedies and delay in disposal of ROM.
7. Interpretation of simultaneous imposition of penalties under Section 76 and Section 78.
8. Payment of full demand, interest, and penalty before Adjudication.
9. Relief sought regarding SSI exemption and leniency in penalty.

Analysis:

1. The petitioner, a commercial construction service provider, faced a service tax liability for services rendered to HPCL between February 2005 and March 2007. An investigation revealed non-registration with Service Tax Authorities and unpaid taxes amounting to ?68,369.

2. The Adjudication Order (OIO No 9/2008) confirmed the tax liability and imposed penalties under Sections 76 and 78 of the Finance Act, 1994, totaling ?68,639 each. The petitioner contended that penalties should not apply as they had paid a portion of the demand before adjudication.

3. The petitioner, citing health issues and relocation, requested an amendment to the Adjudication Order based on payments made before the final determination of taxes. However, the request was not addressed by the Adjudicating Authority, leading to further legal actions.

4. Despite filing for rectification of mistake under Section 74, the application was rejected by the Adjudicating Authority, prompting an appeal before the Commissioner Appeals and subsequently CESTAT due to a delay in filing.

5. The High Court acknowledged the reasonable timeline followed by the petitioner in seeking statutory remedies and expressed sympathy for the situation. The Court noted the small amount involved and the full payment made before adjudication, emphasizing the potential prejudice if the Adjudication Order was not modified.

6. The Court considered the petitioner's plea regarding the simultaneous imposition of penalties under Sections 76 and 78, ultimately agreeing with the petitioner's interpretation. The Court highlighted the subsequent amendment to the Act prohibiting simultaneous penalties, leading to the setting aside of the penalty under Section 76.

7. Given the timely payment of the full demand, interest, and penalty before the Adjudication Order, the Court concluded that the petitioner had fulfilled all obligations under the law. Consequently, the penalty imposed under Section 76 was set aside, providing relief to the petitioner.

This comprehensive analysis of the judgment addresses all the issues involved, highlighting the legal interpretations and outcomes of each aspect of the case.

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