2020 (2) TMI 907 - AT - Service Tax

Quantum of penalty - According to the Adjudicating Authority it is 15% of the Service tax amount whereas as per the first appellate authority it has to be 25% - service tax alongwith the interest paid on being pointed out - HELD THAT - The appellants have all along admitted the tax liability and paid the same with the interest wherever there is a delay. For penalty Section 78 ibid has been invoked by the Revenue. 2nd proviso to Section 78 ibid mentioned that if the assessee pays the service tax within thirty days of the receipt of order of the Central Excise Officer determining the amount of service tax u/s. 73(2) the penalty shall be twenty five percent of the service tax so demanded. The said proviso prescribing concession in penalty to the extent of 25% of duty demanded subject to payment of all dues within 30 days of the order was introduced with effect from 14.5.2003. In view of the Corrigendum issued by the Adjudicating Authority failure of Appellant to pay penalty amount within 30 days of adjudication order cannot be held against the Appellant. The learned Commissioner in the impugned order did not extend this option to the Appellants although he ought to have given this option. May be because of recording the wrong facts in the impugned order that the Order-in- Original is dated 26.2.2016 whereas the same is dated 15.7.2016 and the penalty of 10% was paid on 30.3.2016 and another 5% on 11.8.2016 by the Appellant. But the fact of the matter is that the show cause notice was issued on 26.2.2016 and not the Adjudication Order/Order-in-Original. In order to meet the ends of justice the impugned order needs to be modified and it will be proper to give option to the Appellant to deposit the remaining amount of penalty in order to make it twenty five percent of the service tax amount within thirty days of the communication of this order - Appeal disposed off.

Summary

Issues:
Percentage of penalty - 15% or 25%?

Analysis:
The appeal was filed to challenge the order passed by the Commissioner of GST & Central Excise regarding the percentage of penalty the appellants are liable to pay. The Adjudicating Authority determined the penalty at 15% of the service tax amount, while the first appellate authority set it at 25%. The case involved the non-payment of service tax under the Reverse Charge Mechanism on royalty fees to a foreign party for the period April 2013 to September 2015. The appellants were directed to deposit the service tax amount with interest and penalty. The appellants paid the service tax and interest promptly but delayed the penalty payment. A show cause notice was issued, and the penalty was eventually paid. The Adjudicating Authority initially offered the appellants the option to pay a reduced penalty of 25%, but later amended the penalty to 15%. The department appealed the amendment, leading to the impugned order where the Commissioner set aside the amendment and upheld the original penalty.

The General Manager for the Appellant argued that since the service tax and interest were paid promptly upon discovery, no penalty should be applicable as per Section 76 of the Finance Act, 1994. Despite this, the appellants paid the penalty as demanded. The Revenue's Authorized Representative supported the impugned order's findings. The Tribunal noted that the appellants admitted the tax liability and paid it with interest, albeit with some delay. The Revenue invoked Section 78 of the Act for the penalty, which provides for a concession if all dues are paid within 30 days of the order. The Adjudicating Authority's corrigendum, reducing the penalty to 15%, was deemed invalid as it lacked legal basis. The Tribunal held that the appellants should have been given the option to pay the reduced penalty within 30 days of the communication of the order, as per legal precedents. Therefore, the appellants were granted the opportunity to pay the remaining penalty to make it 25% of the service tax amount within 30 days. Failure to do so would require payment as per the original order.

In conclusion, the Tribunal disposed of the appeal by modifying the impugned order and providing the appellants with the opportunity to pay the remaining penalty within a specified timeframe to conclude the proceedings.