2019 (2) TMI 1566 - AT - Service Tax

Penalty u/s 76 and 78 of FA - the respondent has discharged the entire service tax liability along with interest before issuance of the SCN - Held that - As per sub-section (3) of Section 73 when the assessee has paid up the service tax along with interest on its own ascertainment or being point out by the officers, no penalties are required to be imposed. In the present case, show cause notice was issued even though the appellant had paid up the entire service tax along with interest immediately on being point out by audit. The adjudicating authority has imposed penalty under section 76. The penalties under sections 76 and 78 are mutually exclusive. When the adjudicating authority has considered and imposed penalty under section 76, the same cannot be set aside by the Tribunal in an appeal filed by department requesting to impose penalty under Section 78. There is no ground stated in this appeal contending that penalty imposed under Section 76 is erroneous. The Hon ble High Court of Gujarat in Commissioner of CGST & Central Excise Vs. Sai Consulting Engineering Ltd. 2018 (5) TMI 1425 - GUJARAT HIGH COURT has held that simultaneous penalties under Section 76 as well as 78 of the Finance Act cannot be imposed. The simultaneous penalty under section 76 and 78 cannot be imposed under law - when there is a penalty under section 76, the simultaneous penalty under section 78 cannot be imposed under law - the respondent has paid up the entire demand along with interest before issuance of show cause notice, hence further penalty under section 78 is unwarranted. Appeal dismissed - decided against Revenue.

Summary

Issues: Failure to impose penalty under section 78 of the Finance Act despite the proposal in the show cause notice.

Analysis:
1. The case involved the respondents providing advertising services and being audited for service tax discrepancies from October 2008 to October 2009. The adjudicating authority confirmed a demand for short-paid service tax, interest, and penalties under sections 76 and 77 of the Finance Act, 1994. The department appealed, arguing for the imposition of penalty under section 78, as proposed in the show cause notice.

2. The appellant contended that the respondents had declared lesser taxable value in their returns and failed to pay service tax for specific periods, indicating a deliberate suppression of facts to evade duty. The appellant sought the imposition of penalty under section 78 based on these allegations of suppression, which the adjudicating authority did not apply in its decision.

3. Despite notices issued, no representation was made by the respondent during the proceedings. The matter was considered after hearing the appellant's representative and reviewing the records, focusing on the failure to impose penalty under section 78 as raised by the department.

4. The department's grievance centered on the adjudicating authority's omission to impose penalty under section 78. However, it was noted that the respondent had paid the entire service tax liability with interest before the show cause notice was issued, partly through CENVAT credit. As per Section 73(3), if the tax and interest are paid either voluntarily or upon detection by authorities, penalties may not apply. The appellant argued for penalty under section 78, but the Tribunal found penalties under sections 76 and 78 to be mutually exclusive.

5. The Tribunal cited legal precedents and the last proviso to section 78, stating that if a penalty is due under section 78, section 76 penalties do not apply. Since the adjudicating authority had already imposed a penalty under section 76, the Tribunal could not overturn it based on the department's request for section 78 penalties. The Tribunal referenced case law supporting the exclusivity of penalties under these sections.

6. Ultimately, the Tribunal concluded that simultaneous penalties under sections 76 and 78 cannot be imposed. Given the circumstances where the respondent had paid the entire demand with interest before the show cause notice, further penalty under section 78 was deemed unnecessary. The impugned order was upheld, and the appeal by the Revenue was dismissed on 26.02.2019.