2019 (11) TMI 60 - AT - Service Tax

Imposition of penalty u/s 76 and 78 of FA - appellant had only deposited a part amount before the issuance of SCN - HELD THAT - The major part of the demand was deposited by the appellant prior to the issuance of the show cause notice. As such penalty required to be imposed under Section 78 was only to the extent of the amount not deposited by them. The Original Adjudicating Authority had given an option to the appellant to deposit 25% of the penalty within a period of one month from the date of passing of the order. As such deposit of 25% of the balance amount as deposited by the appellant, as penalty under Section 78 is appropriate. There is no dispute about the fact that the services provided by the appellants were Works Contract Service and as such switch over to the said services for payment of service tax which was in the knowledge of the Revenue also cannot be held to be with any mala fide. The only lapse on the part of the appellant was that they did not get their registration certificate amended - However, appellant has already deposited duty plus 25% penalty on balance duty which was deposited after the order, the balance amount of penalty imposed upon them under Section 78 is set aside. Penalty u/s 76 of FA - HELD THAT - It is well settled law that both the penalties i.e. under Section 76 and 78 cannot be imposed simultaneously - Penalty u/s 76 set aside. Appeal allowed in part.

Summary

Issues:
Request to Decide on Merit, Short Payment of Service Tax, Imposition of Penalty under Section 76 and 78, Dispute on Penalty Imposition, Applicability of Works Contract Services, Amendment of Registration Certificate, Simultaneous Imposition of Penalties under Section 76 and 78.

Analysis:
The appellant requested to decide the appeal on merits. The appellant, registered under construction services, paid service tax as Works Contract Services without amending the registration certificate, resulting in short payment of ?12,25,533. The appellant deposited ?7,69,820 with interest before the show cause notice and the balance amount of ?4,55,713 with interest within a month of the Order-in-Original. The Commissioner (Appeals) upheld a 100% penalty due to partial payment before the notice issuance. The appeal challenges penalties under Section 76 and 78.

The Tribunal found that penalty under Section 78 should only apply to the amount not deposited before the notice issuance. The Original Adjudicating Authority allowed the appellant to pay 25% of the penalty within a month, which the appellant complied with. The Tribunal noted that the switch to Works Contract Services for tax payment was known to the Revenue, indicating no malafide intent. The appellant's failure to amend the registration certificate was the only lapse. Given the appellant's payment of duty and 25% penalty on the balance amount post-order, the Tribunal set aside the remaining penalty under Section 78.

Regarding penalties, the Tribunal referenced a precedent stating that penalties under Section 76 and 78 cannot be imposed simultaneously. Citing the case of Artefact Projects Ltd. vs. Commissioner of Central Excise, Nagpur, the Tribunal annulled the penalty under Section 76. The appeal was disposed of accordingly on 16/05/2019.