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2020 (11) TMI 581 - AT - Service TaxNon-imposition of penalty u/s 76 of FA - Commercial or Industrial Construction Services - Department submits that Section 78 of Finance Act, 1984 was amended w.e.f. 10.05.2008 only to provide that penalty under Section 76 need not be imposed if penalty under Section 78 is imposed - Effect of amendment, retrospective or prospective? - Difference of Opinion. HELD THAT - In view of the difference of opinion, the following questions arise for consideration by the learned 3rd Member - (1) Whether penalty under Section 76 and 78 are prescribed for different type of violations and are mutually exclusive as held by Member (Judicial) OR that both the penalties can be imposed simultaneously as held by Member (Technical). (2) Whether the amendment brought in Section 78 by Finance Act, 2008 by addition of proviso (w.e.f. 10.5.2008) providing that where penalty is imposed under Section 78 no penalty is imposable under Section 76, is clarificatory in nature, have got retrospective effect, as held by Member (Judicial) or whether the aforementioned amendment is not retrospective but prospective and hence the simultaneous penalties can be imposed for the period prior to 10.5.2008 as held by Member (Technical). (3) As held by Member (Judicial) in view of Section 80 of the Finance Act, 1994, dropping of penalty under Section 76 by the adjudicating authority is not questionable or as held by Member (Technical), the penalty under Section 76 dropped by the adjudicating authority should have been imposed? (4) As held by Member (Judicial) that the ruling of Kerala High Court in the case of ACCE Vs. Krishna Poduwal 2005 (10) TMI 279 - KERALA HIGH COURT is not applicable in the present case as that ruling is prior to the amendment dated 10.5.2008 in Section 78 or as held by Member (Technical) that the aforementioned ruling is applicable and simultaneous penalty under Section 76 and 78 are imposable? Registry is directed to put up the appeal record before Hon ble President for nomination of 3rd Member to consider the aforementioned questions and difference of opinion for his opinion.
Issues Involved:
1. Imposition of Penalty under Section 76 and Section 78 of the Finance Act, 1994. 2. Retrospective or Prospective Application of the Amendment to Section 78. 3. Applicability of Section 80 of the Finance Act, 1994. 4. Relevance of the Kerala High Court Ruling in ACCE Vs. Krishna Poduwal. Issue-Wise Detailed Analysis: 1. Imposition of Penalty under Section 76 and Section 78 of the Finance Act, 1994: The Department appealed against the non-imposition of penalty under Section 76, arguing that penalties under both Sections 76 and 78 were applicable before the amendment on 10.05.2008. The Tribunal cited various cases supporting the imposition of penalties under both sections before the amendment. The respondents contended that penalties under Sections 76 and 78 are not simultaneously imposable, even before the amendment, citing different case laws. The Tribunal found that the Revenue had a valid case for imposing penalties under both sections, as the offenses under Sections 76 and 78 are distinct and separate. Therefore, the Revenue's appeal was allowed, and a penalty of ?100 per day on the confirmed Service Tax was imposed under Section 76. 2. Retrospective or Prospective Application of the Amendment to Section 78: The amendment to Section 78, effective from 10.05.2008, provided that if a penalty is imposed under Section 78, no penalty is imposable under Section 76. The Tribunal noted that this amendment was not retrospective. The Kerala High Court in ACCE Vs. Krishna Poduwal held that penalties under both sections could be imposed if the conditions for imposition are satisfied. However, the Karnataka High Court in CST, Bangalore Vs. Motor World and the Punjab & Haryana High Court in CCE, First Flight Courier held that penalties under Sections 76 and 78 are mutually exclusive and cannot be imposed simultaneously, even before the amendment, as the amendment was clarificatory in nature. 3. Applicability of Section 80 of the Finance Act, 1994: Section 80 provides that no penalty shall be imposed if the assessee proves there was reasonable cause for the failure. The Tribunal noted that the Commissioner had the discretionary power not to impose a penalty under Section 76 if a penalty under Section 78 was imposed. The Gujarat High Court in Raval Trading Company Vs. CST held that the amendment to Section 78 was clarificatory and did not create new liability, implying that penalties under Sections 76 and 78 are mutually exclusive. 4. Relevance of the Kerala High Court Ruling in ACCE Vs. Krishna Poduwal: The Kerala High Court ruling in ACCE Vs. Krishna Poduwal, pronounced before the amendment to Section 78, held that penalties under both sections could be imposed if the conditions for imposition are satisfied. However, the Karnataka High Court and other High Courts differed, holding that penalties under Sections 76 and 78 are mutually exclusive and cannot be imposed simultaneously. The Tribunal found that the wisdom of the Commissioner in not imposing a penalty under Section 76, in view of the penalty under Section 78, could not be questioned, and upheld the impugned order. Separate Judgments Delivered by Judges: - Technical Member (P. Anjani Kumar): Held that penalties under both Sections 76 and 78 can be imposed simultaneously before the amendment, as the offenses are distinct and separate. - Judicial Member (Anil Choudhary): Held that penalties under Sections 76 and 78 are mutually exclusive and cannot be imposed simultaneously, even before the amendment, as the amendment was clarificatory in nature. He also held that the Commissioner's discretion in not imposing a penalty under Section 76 should be upheld. Difference of Opinion: The case was referred to a third member to resolve the following questions: 1. Whether penalties under Sections 76 and 78 are mutually exclusive. 2. Whether the amendment to Section 78 is retrospective or prospective. 3. Whether the Commissioner's discretion in not imposing a penalty under Section 76 is valid. 4. Whether the Kerala High Court ruling in ACCE Vs. Krishna Poduwal is applicable post-amendment. The appeal records were directed to be put before the Hon'ble President for nomination of a third member to resolve the difference of opinion.
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